contents...rupee depreciation were adversely impacting most of our key businesses. despite this, the...

03 FinancialHighlights 04 Chairman’sReview 07 ManagementReport 07 ChiefExecutiveOfficer’sReview 10 FinancialReview 15 SectorReview 24 RiskManagement 26 SustainabilityReport 35 Stewardship 35 EnterpriseGovernance 44 Directors’InterestinContractswiththeCompany 46 BoardofDirectors 48 SeniorManagement 50 AnnualReportoftheDirectorsontheAffairs oftheCompany

57 FinancialStatements 58 StatementofDirectors’Responsibility 59 Auditors’Report 60 IncomeStatement 61 BalanceSheet 62 StatementofChangesinEquity 64 CashFlowStatement 65 NotestotheFinancialStatements 109 ShareInformation 111 FiveYearSummary 112 Glossary 113 NoticeofMeeting EnclosedFormofProxy

contents

Adding value to and enriching Hemas’ business enterprise lie at the very core of our being. It forms the reason and

basis for our unswerving pursuit of new segments of activity that promise more robust growth, at a faster pace

in the years ahead.

At the same time, ours is an enriching enterprise, where every product, service and process has been imbued with innovation and a defining quality that takes it from the

‘run of the mill’ category to the ‘one of a kind’.

In the process, our portfolio uplifts lives across the Nation and lives up to the Company’s new purpose... offering

outstanding products and services that enrich the lives of our customers, whilst creating superior value

for our shareholders.

Hemas is one of Sri Lanka’s top diversified

conglomerates organised into five key sectors -

FMCG, Healthcare, Transportation, Leisure and

Power. The Group, which commenced operations

in 1948, is listed on the Colombo Stock Exchange.

We are guided by our core values - a passion for our

customers, an obsession for performance, our drive

for innovation and our concern for people.

These values are our moral compass

as we progress on new and exciting business

ventures and ideas.

WE ARE HEMASWE ARE HEMAS

06/07

GROUP REVENUE

16,000

12,000

8,000

4,000

007/08 08/09

(Rs. Mn)

PROFIT ATTRIBUTABLE TOTHE GROUP (Rs. Mn)

1,200

900

600

300

006/07 07/08 08/09

(Rs. Mn)

06/07

CASH FROM OPERATIONS

007/08 08/09

400

800

1,200

1,600(Rs. Mn)

Total Shareholders' FundsReturn on Equity

06/070

07/08 08/09

SHAREHOLDERS FUNDS & ROE

2,000

4,000

6,000

8,000

6

12

18

24

30

0

(Rs. Mn) (%)

Yearended31March 2009 2008 %Change 2007

OperatiNGresults

GroupRevenue(Rs.’000s) 15,342,278 14,163,805 8.3 11,778,136

ProfitbeforeInterestandTax(Rs.’000s) 1,328,870 1,606,019 (17.3) 1,680,111

ProfitbeforeTax(Rs.’000s) 856,932 1,259,455 (32.0) 1,407,185

ProfitafterTaxation(Rs.’000s) 719,078 1,150,830 (37.5) 1,019,537

ProfitAttributabletotheGroup(Rs.’000s) 775,128 1,135,419 (31.7) 1,005,727

Dividend-Gross(Rs.’000s) 126,635 126,635 0.0 252,726

CashfromOperations(Rs.’000s) 1,458,434 929,277 56.9 176,992

BalaNcesheethiGhliGhts

TotalAssets(Rs.’000s) 14,835,812 13,130,625 13.0 11,395,855

TotalShareholders’Funds(Rs.’000s) 7,028,290 6,433,698 9.2 5,274,139

No.ofShares(’000s) 101,958 101,308 0.6 101,308

Gearing(%) 32.9 31.4 4.8 33.0

sharehOlderiNfOrmatiON

ReturnonEquity(%) 11.5 19.4 (40.6) 21.1

EarningsperShare(Rs.) 7.57 11.13 (32.0) 9.9

DividendperShare(Rs.) 1.25 1.25 0.0 2.5

DividendPayout(%) 16.5 11.2 47.1 25.4

NetAssetperShare(Rs.) 68.90 63.50 8.5 52.30

MarketCapitalisation(Rs.’000s) 6,142,977 8,864,461 (30.7) 10,831,779

PriceEarningsRatio(Times) 7.96 7.86 1.3 10.81

MarketPriceasat31March(Rs.) 60.25 87.50 (31.1) 107.00

FinanCiaL HiGHLiGHTS

HEMASHOLDINGSPLCANNUALREPORT2008/094

CHairMan’S rEviEW

Whenwepresentedourstrategyintheyearunder

review,thepredominanthuewasthedarkgrey

ofgloom.AglobalfinancialcrisisintheWest,the

uncertaintyofitsimpactonSriLanka,ourdwindling

foreignreservesanditsimplications,andofcourse

ourownSriLankanshenanigansthatmimickedthe

bigUSponzischemes.Theglimmerofbrightness

wastheendofthelongwarwiththeLTTE.

YourBoardhadtodevelopitsstrategyinthecontext

ofthisscenario.Welookedlongandhardatour

businessandsawthatithadaverysturdycoreinits

FMCGbusinessanditsPharmaceuticalbusiness.

FMCGsalesincreasedby11%,EBITDAperhaps

thebestmeasurementoftheintrinsicstrength

ofabusinessdeliveredagrowthof20%.The

pharmaceuticalbusinessgrewitstoplineby19%

anditsEBITDAby39%.Powerwasthethirdlegof

thetripod.Ithassustaineditsimportantcontribution

toprofits.TheTransportationsectorcontinuestobe

astronggrowthsectorforthegroup.

4

“The Board after careful consideration decided to pursue a robust approach and

to continue to build for the future”

HEMASHOLDINGSPLCANNUALREPORT2008/09 5

Anoptionwastobattendownthehatchesand

nurturethecorebusinessthatwassailingserenely

throughtheeconomicturmoilandtowaitforclearer

skiesaboutthelonger-termeconomicscenario.The

responseofabusinessdependsonitsculture.One

ofthegreatstrengthsofapublicCompanythatis

basedonasuccessfulfamilybusinessisthespirit

ofenterprisethatcamewiththebusinessandthis

remainsingrainedintheDNAofthisCompany.

Thechallengeistobalanceenterpriseandcaution.

Whilstremainingwithinthisequation,theBoardafter

carefulconsiderationdecidedtopursuearobust

approachandtocontinuetobuildforthefutureby

developingtheplannednewsegmentsofactivity.

Thiswillenableittogrowatafasterratethanthe

solidratesofgrowthitexpectsfromitscurrentcore

business.Thiswasnotacaseofplayingroulettewith

shareholders’fundsincludingthesignificantstakeof

theExecutiveDirectorsintheequityofthebusiness.

ThedecisiontopursuewiththeWattalaHospital,

theGalleHospitalandtoaddtothepowerassets

withahydropowerprojectwereallstructuredwithin

strictdebtequityratios.Theywerealsounderpinned

byastrongcashflowfromthecorebusinessand

thebusinesshasthecomfortofhavingarealestate

portfoliothatisnotneededforcurrentactivities.

Welookforwardwithconfidencetothecontribution

thesenewbusinessareaswillmaketoourrevenue,

profitsandcashinthefuture.

Organicgrowthisabitlikethetraditionalruralhabit

ofdrinkingstrongplainteawithjaggery.Youhave

toendurethebittertanninoftheteabeforeitis

overwhelmedbythesweetnessofthejaggery.Our

businessintheyearunderreviewisreflectingthis

phenomena.Thecashgoesoutupfrontcreatingthe

incrementalfinancingcostsandtheoperatingcosts

followwellaheadoftherevenuestreamsthatalways

startasatrickle.Thisthenaffectsadverselytheprofits

oftheyearandthisiswhathappenedin2008.Thenew

initiativesreducedprofitsbyRs.135Mn.

Salesincreasedby8%.EBITDAfellby3%.Interest

costsincreasedby36%.Profitbeforetaxand

earningsbothdeclinedby32%.TheCEOwilldealin

greaterdetailwiththeperformanceduringtheyear.

Iwouldjustliketoaddthatwhenthenewactivities

getintogearwewillseetheincrementalbenefitsand

2009willreflectthestartofthisphase.

lookingbacknow,wearedelightedthatwe

pursuedthisstrategy.theglimmerofhopewe

sawatthetimehasnowblossomedintothebig

brightnessofpeace.Weapplaudhisexcellency

thepresident’svisionofasocietyfreeof

discriminationandwiththisweperceiveamuch

brighterfutureforbusiness.

Therefore,aswefeeloptimisticaboutthenearfuture

wedecidedthatitwasappropriatetodeclarea

dividendofRs.1.80ashare.

Thetransitionfromprivatecompanytopublic

companyisnowwellbehindus.Allthebasic

principlesofgoodgovernancearewellestablished

intheCompany.TheAuditCommitteeandthe

RemunerationCommitteemetatregularintervalsand

theybothperformedtheirroleswell.Considerable

attentionwaspaidtoriskmanagementandsound

processeshavebeeninitiated.


Wearemindfulofthekeyroleofourtopcore

managementteam.Iampleasedthatwithyour

approvalwehaveputinplaceanESOSthatreflects

ourrecognitionofthiscoreteamandprovidesthem

withanincentiveandopportunitytosharewithyou

thelonger-termbenefitsofourstrategiesforthe

future.

Iwishtotakethisopportunitytothankallour

employeesfortheirvaluablecontributionandto

acknowledgetheirverypositiveresponsetothe

challengeswefaceinthisenvironment.Wewill

continuetoendeavourtoprovidethemwithafruitful

andstimulatingworkingenvironment.

Ihavehadgreatsupportfrommycolleaguesonthe

BoardandIgreatlyappreciatetheirstronginputsto

theprocessofdevelopingthewayforward.Ithank

themforboththeirsupportandinput.

Everysuccessfulbusinessmusthaveastrongbridge

thatlinkstheBoardtothemanagement.Weare

fortunatethatwehaveanexcellentbridgeandmust

congratulatetheCEOfornurturingthisrelationship

andforhisoutstandingleadershipduringthis

difficultperiodofgreatuncertaintyintheexternal

environment.

deshamanyalalithdemel

Chairman

26May2009

CHairMan’S rEviEW


ManaGEMEnT rEPOrT

“Today we have the opportunity to dream of a Sri Lanka without conflict”

AsanewdawnforSriLankaawaitsus,itgivesme

greatpleasuretopresentthefinancialresultsofyour

Companyfortheyearended31March2009.

2008WasayearOfiNvestiNGfOrthefuture…

Overthecourseoflastyear,wecompleted

investmentprojectsaccountingforoverRs.3Bnin

value.ThefirstphaseofourHospitalstrategygot

underwaywithourhospitalsinWattalaandGalle

becomingfullyoperational.TheHemasInnovation

CentreandFMCGproductionfacilityinDankotuwa

alsocommencedoperations.Furthermore,we

markedourpresenceintherenewableenergyspace

bycommissioningourfirstMini-Hydropowerplant

inKandy.Inhindsight,ourpolicyofmaintaining

conservativelevelsofgearingserveduswellasthe

costofborrowingincreaseddramaticallyandsources

ofdebtdriedup.Evenaftertheseinvestments,the

Groupmaintainsahealthygearingratioof33%.

Theseinvestmentsweremadeinrelativelyless

volatileindustriesandafterrigorousevaluation

assumingadifficulteconomicenvironmentglobally

andinSriLanka.TheturnaroundintheNorth-East

conflictandrecoveryintheglobaleconomy,willhave

apositiveimpactonreturns.

CHiEF EXECUTivE OFFiCEr’S rEviEW


OurcOreBusiNessesperfOrmedWelldespitetOuGhcONditiONs…

Overtheyear,wehadtofaceachallengingeconomic

environmentwhereinflation,interestratesand

Rupeedepreciationwereadverselyimpactingmost

ofourkeybusinesses.Despitethis,theGroup

demonstratedahighlevelofresiliencewithourcore

businessesperformingwell.OverallGrouprevenue

increased8%tocloseatRs.15.3Bnfortheyear

ended31March2009,whilstGroupearningsfell

32%toRs.775Mn.ThedropinEarningsislargely

attributabletoplannedstartuplossesandfinance

costsassociatedwithournewinitiativesandthe

absenceofanyappreciationinthefairvalueof

investmentproperties.Whenthesefactorsare

isolated,theunderlyingbusinesseshaverecordeda

revenuegrowthof8%whilemaintaininglastyear’s

profitlevels.Ourfocusoncashpaiddividendswith

NetCashfromOperationsregisteringRs.1,458Mn

ascomparedtoRs.929Mnthepreviousyear.On

accountofthesignificantlyhighercapitalemployed

inthebusiness,ReturnonCapitalEmployedhasnow

declinedto12%.

iNitialBuild-upOfhOspitalBusiNessiseNcOuraGiNG…

HemasHospitalsinWattalaandGalle,builtatatotal

costofRs.2Bn,arenowfullyoperationalwith150

beds.Ourphilosophyistodeliverqualityaffordable

healthcareservicesthroughouruniquemodelofa

community-basedhospital.TheflagshipHospital

inWattalawascompletedinDecember2008,

andthetake-upofourvaluepropositionisclearly

evidentwithmanypatientswhoweretravellingto

Colombo,nowfrequentingtheWattalaHospital.All

keyspecialitiesarecoveredandthehospitaloffers

completediagnosticandimagingservices,including

thefirst-everopenmagnetMRIinSriLanka.Both

in-patientandout-patientnumbershaveshown

steadygrowthandweareconfidentthatasthe

reputationofthehospitalgrows,wewillreachtarget

capacityutilisationlevelswithinthecourseofthe

nextfinancialyear.WiththecompletionoftheGalle

ProjectinMarch2009,wearenowwellgearedto

enhanceourvaluecapturebyofferingawiderange

ofdiagnosticandin-patientservicestothealready

establishedchannellingpatientbase.

fOcusONprOductiNNOvatiONdrivesOurBraNdBuildiNGiNvestmeNts…

Consumerstodayaremorediscerningthanever

andbuildingstrongbrandsneedsuniqueinsights

inordertodesignandcommunicatetheoffering.

Duringtheyear,thebusinesshasdonesomeground-

breakingworkwithregardtoobservingproduct

useoccasionsbothinandoutofhome(Including

bathingspots).Theseinsightsarethenusedto

inspiretheinnovationsteamandtodrivemarketing

communications.ThesuccessofDivaforexample,

whichisnowthelargestwashingpowderbrand

inSriLanka,canbeattributedtotheseconsumer

insights.Whilstthebenefitofourinvestmentsinnew

innovationswouldaccrueoverthecomingyears,

theFMCGbusinessdeliveredagoodperformance

overtheyear,growingrevenuesandoperatingprofits

by11%and16%respectively.Industrygrowthfor

PersonalCareproductswasflatalthoughoverall

realisationincreasedduetopriceincreases.Our

brandpropositionsinthePersonalCarebusiness

continuedtoholdmarketsharewhilstthebusiness

grewitsfranchiseinthePersonalWashand

Householdmarkets.



respONdiNGtOtheGlOBalcrisisWasahiGhpriOrity…

Withthegrimnewsemergingoutofthewestern

marketsinlate2008,theCompanyconducteda

strategicreviewandformedahypothesisbased

ontheassumptionthatSriLankawouldnotbe

totallyimmunetosuchacrisis,althoughour

sectorsareexpectedtobelessvulnerableinsuch

anenvironment.Ourplanwasthereforetobe

conservativeinprojectingdemandandtoadjust

ourcostbaseaccordingly.Withinthisscenario,

theCompanyadoptedaseriesofproductivityand

costimprovementinitiativeswithaviewtoensuring

thatoperatingmarginswouldnotbeeroded.All

aspectsofworkingcapitalwerereviewedand

non-essentialcapitalexpendituresweredeferred

whereverpossible.Intandemwiththis,theCompany

adoptedmeasurestosecureandimprovecustomer

relationshipsandgetbettersuppliertermswherever

possible.Thishasresultedinaleanerandmore

efficientorganisation.

OurOrGaNisatiONalcultureisakeystreNGth…

Thepastyearhasbeenoneinwhichallteam

playersstretchedtoachieveourbusinessobjectives

whilstensuringexecutiononournumerousgrowth

initiatives.Moreover,astheglobalcrisisbeganto

unfold,asisourculture,wesharedinatransparent

manner,thewaythismightimpacttheworld,

SriLankaandourbusinesses.Almostwithout

exception,theteamcameforwardvoluntarilyto

delivertheproductivityimprovementsthatwefelt

werenecessary.Thisisasourceoftremendous

strengthandtogetherwiththeentrepreneurialspirit

thatresideswithin;wearewellpositionedtoreapthe

benefitsofourgrowthinitiativesandtheeconomic

resurgenceofSriLankawhichissuretocome.

WeareOptimisticaBOutthefuture…

Today,wehavetheopportunitytodreamofa

SriLankawithoutconflict.Forthis,wemustwhole-

heartedlypraisetheleadershipofHisExcellency

thePresidentandtheentiremilitaryandpolitical

leadershipforaccomplishingthisfeatwhichveryfew

thoughtpossiblejustoneyearago.Ofcourse,our

mostsincerethanksandgratitudearereservedfor

themenandwomenofthearmedforceswhohave

sacrificedsomuchindefenceofourmotherland.

Thiswarhasconsumedsomuchofourresourcesfor

overaquartercenturyandallthatremainsnowisto

‘winthepeace’.Nodoubt,thiswouldput

SriLankafirmlybackontheroadtosustainable

growthanddevelopmentbringingopportunities,not

onlyintheNorth&East,but,allovertheIsland.Over

thelastquartercenturyyourCompanyhasgrownin

anenvironmentthatwasdifficultforbusiness.After

solong,wecannowplanforabettertomorrowand

IhaveeveryconfidencethatHemaswillrealiseits

fullestpotentialalongwiththatofSriLanka.

Inconclusion,IwouldliketothanktheChairmanand

theBoardofDirectorsfortheircontinuedguidanceand

support.Thishasbeenachallengingyearandvery

specialthanksasalwaystotheentireHemasteam

whohavealwaysgivenoftheirbest.Onbehalfofthe

Board,Iwouldalsoliketothankourcustomersand

ourbusinesspartnerswhohavesupportedusoverthe

years.Finally,Ithankyou,ourshareholders,foryour

continuedtrustandconfidenceintheCompany.

huseinesufally

ChiefExecutiveOfficer

26May2009



reveNue

Consolidatedrevenuefortheyearended

31March2009wasRs.15.3Bn,an8.3%growth

fromthepreviousyear.Overthepastfiveyears,

consolidatedrevenueshavegrownatacompounded

annualrateof17.2%.LowerrevenuesfromThermal

Power,duetothepass-througheffectoflowerfurnace

oilpricesvis-à-visthepreviousyear,havekeptthe

growthinoverallrevenuesatarelativelymodestlevel

during2008/09.WhilstHealthcareandTransportation

sectorshaverecordedthehighestgrowthatsector

level,FMCGandHealthcarehaveaccountedfor

95.8%ofoverallgrowthassetoutinTable1.

Despitetheslowdownintop-linegrowth,itis

encouragingtonotethatourcorebusinesssectors,

FMCGandHealthcarehavegrownfasterduring

2008/09whencomparedwiththepreviousyear.

WhilstTransportationSectorhadagoodyear,witha

19.0%top-linegrowth,ourLeisureSectormarginally

declinedasitwasimpactedbythedeteriorating

externaldemandandtheescalationofhostilitiesin

theNorth-Eastduringtheyear.

FinanCiaL rEviEW

prOfitaBility

OperatiNGprOfit

TheGrouprecordeda17.3%dropinoperating

profitsduringtheyear,fromRs.1,606Mnto

Rs.1,329Mn.Operatingmarginshavedeteriorated

from11.3%in2007/08to8.7%in2008/09.Drop

inmarginsarelargelyattributabletoplanned

operatinglossesinourHospitalsandotherstart-up

businesses,declineinPowerprofitsduetoplanned

overhaulcosts,andtheabsenceofanyfairvalue

appreciationininvestmentproperties.

AsshowninTable2,FMCGandTransportation

sectorshavecontributedpositivelytowards

operatingmargins.AsfarastheHealthcareSector

isconcerned,ourPharmaceuticalsbusinesshas

performedexceptionallywellintermsofboth

revenuesandprofits.However,theoverallsector

performancereportsadeclineinoperatingprofits

andmarginsduetostart-uplossesofHospitals.

reveNueaNalysis

RevenueMix Growth ContributiontoGrowth revenuemix 2007/08 2008/09 Absolute %ofTotal 2008/09 % % % % %

FMCG 29.5 10.6 3.1 37.7 30.2

Healthcare 22.1 21.8 4.8 58.1 24.9

Leisure 6.7 (1.3) (0.1) (1.0) 6.1

Transportation 4.0 19.0 0.8 9.2 4.4

Power 37.2 (1.8) (0.7) (8.0) 33.7

Other 0.5 72.4 0.3 4.0 0.7

Group 100.0 8.3 8.3 100.0 100.0

Table1

FMCG

Healthcare

Leisure

Transportation

Power

Others

Group Revenue Growth

GROUP REVENUE BREAK-UP

4,000

8,000

12,000

16,000

10

20

30

40

004/05 05/06 06/07 07/08 08/09

0

(Rs. Mn) (%)

200400600800

1,0001,2001,4001,6001,800

OPERATING PROFIT

004/05 05/06 06/07 07/08 08/09

Operating ProfitOperating Margin

(Rs. Mn) (%)

-20-10010203040

Operating Profit Growth


Ataconsolidatedlevel,grossmarginshave

remainedrelativelystable,howevera24.1%

increaseinadministrativeexpenses,mainlyowingto

increasedmanpowercostsinourcorebusinesses

andadditionscomingtoourcostbasefromour

newbusinesses,andtheabsenceoffairvalue

appreciation,havedentedthemarginsby2.8%.

fiNaNcecOst

FinancecostacrosstheGrouphasincreasedby

36.2%duringtheyear,fromRs.347Mnto

Rs.472Mnandtheinterestcoverhasdecreased

atafasterpacefrom4.6to2.8,asprofitsdeclined.

Duringtheyear,therehasbeena20%netincrease

inconsolidatedborrowings,fromRs.3,219Mnto

Rs.3,862Mn,owingtoinvestmentsinHospitals,

RenewableEnergyandFMCGproductionandR&D

facilities.Totalgearinghasincreasedfrom31.4%to

32.9%overtheyear.TheGrouphasbeensuccessful

insecuringasignificantportionofitslong-termdebt

atpreferentialrates,andasaresulttheoverallcostof

debtoftheGroupiswellbelowmarketrates.

taxatiON

Asourhightaxpayingbusinesseshaveperformed

particularlywellduringtheyear,thetaxexpensehas

increased26.9%,fromRs.109Mnin2007/08to

Rs.138Mnin2008/09.However,asthedecline

inGroupProfitsduetolossesinHospitals,drop

inPowerearningsandabsenceoffairvalue

appreciationininvestmentpropertyhasnobearing

ontaxes,effectivetaxratehasrisenfrom8.6%to

16.1%year-on-year.

OperatiNGmarGiNaNalysis

RevenueMix OperatingMargins MarginImpact 2007/08 2008/09 2007/08 2008/09 Mix Profitability Total % % % % % % %

FMCG 29.5 30.2 12.8 13.5 0.0 0.2 0.2

Healthcare 22.1 24.9 8.5 3.9 (0.2) (1.0) (1.2)

Leisure 6.7 6.1 4.5 6.0 0.0 0.1 0.1

Transportation 4.0 4.4 27.5 31.3 0.1 0.1 0.2

Power 37.2 33.7 10.8 9.7 0.1 (0.4) (0.4)

Other 0.5 0.7 49.5 (192.5) (0.5) (1.1) (1.7)

Group 100.0 100.0 11.3 8.7 (0.5) (2.1) (2.8)

Table2

FINANCE COST

004/05 05/06 06/07 07/08 08/09

Finance CostInterest Cover

(Rs. Mn) (%)

0

100

200

300

400

500

1.02.03.04.05.06.07.08.09.0

FinanCiaL rEviEW

TAXATION

004/05 05/06 06/07 07/08 08/09

TaxesEffective Tax Rate

(Rs. Mn) (%)

050

100150200250300350400450

51015202530

NetprOfit

Fortheyearunderreview,theGrouprecordednet

profitsaftertaxofRs.719Mn,adeclineof37.5%

fromthepreviousyear.GroupEarningsontheother

handhasdeclinedonlyby31.7%,fromRs.1,135Mn

toRs.775Mn,asaresultofanegativeminority

interest.Whilstthishasbeenthefirsttimethatthe

Grouprecordedadeclineinprofitssincegoingpublic

in2003,profitsfromunderlyingoperations,i.e.after

excludingstartuplosses,relatedfinancecostsand

fairvalueappreciation,haveremainedflatduringthe

year.Giventhechallengingbusinessenvironment


thatpersistedthroughouttheyear,weconsiderthis

year’sperformancesatisfactory,andfromafuturistic

perspectiveitisencouragingtohaveachievedsuch

levelsofprofitsafterabsorbingplannedlosses

resultingfromournewinvestmentsthatareessential

forourlong-termgrowth.

Inadditiontothefactorsthathavedraggedthe

operatingmargins,increasedfinancecostsanda

highereffectivetaxratehavecausedthenetmargin

todeclinefrom8.1%to4.7%.

NetmarginanalysisgiveninTable3illustrateshow

thechangeinrevenuemixandthedropinsector

profitabilityhasimpactedtheoverallGroupmargins.

AtaGrouplevel,2.8%ofthetotalmargindropcan

beattributedtodropinprofitabilityineachSector

andthebalance0.7%canbeattributedtochanges

inrevenuemixwhenanalysingtheoveralldropof

3.5%inGroupnetmarginsduringtheyear.

cashflOW

DespitepressureonGroupearningsduetostart-up

lossesandincreasedfinancecosts,cashgenerated

fromoperatingactivitieshasincreased57%during

theyear,fromRs.929MntoRs.1,458Mn.Improved

workingcapitalmanagement,inallourcore

businesses,FMCG,Pharmaceuticals,Transportation

andPower,hasfacilitatedanexceptionallyhighlevel

ofinternalcashgenerationduringtheyear.

NetmarGiNaNalysis

RevenueMix PATMargins MarginImpact 2007/08 2008/09 2007/08 2008/09 Mix Profitability Total % % % % % % %

FMCG 29.5 30.2 12.3 11.5 0.0 (0.2) (0.2)

Healthcare 22.1 24.9 5.9 0.4 (0.2) (1.2) (1.4)

Leisure 6.7 6.1 0.9 0.1 0.0 0.0 0.0

Transportation 4.0 4.4 21.2 24.1 0.1 0.1 0.2

Power 37.2 33.7 5.8 4.7 0.1 (0.4) (0.3)

Other 0.5 0.7 25.7 (215.7) (0.6) (1.1) (1.7)

Group 100.0 100.0 8.1 4.7 (0.6) (2.8) (3.4)

Table3

Despiteheavyinvestmentsthatcontinuedinto

2008/09fromthepreviousyear,onaccountof

ourHospitalandMiniHydroprojects,theGroup

generatedfreecashflowsofRs.355Mn(beforedebt

repaymentsandfinancecosts)duringtheyear.

CASH FLOW

004/05 05/06 06/07 07/08 08/09

Operating Cash FlowProfit after Tax

(Rs. Mn) (%)

Operating Cash Flow Growth

300

600

900

1,200

1,500

-150

0

150

300

450

600

PROFIT AFTER TAX

04/05 05/06 06/07 07/08 08/09

Profit after TaxNet Margin

(Rs. Mn) (%)

Profit Growth

-60

-40

-20

0

20

40

250

500

750

1,000

1,250

0

FinanCiaL rEviEW


aNalysisOfreturNONcapital

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 % % % % % %

OperatingMargin 13.2 13.1 15.6 14.3 11.3 8.7

AssetTurnover 1.14 1.05 0.99 1.10 1.15 1.10

Assets/CapitalEmployed 1.40 1.34 1.33 1.32 1.29 1.27

rOce 21.0 18.3 20.7 20.7 16.9 12.1

InterestCover 18.8 7.8 5.4 6.2 4.6 2.8

EffectiveTaxRate 24.6 21.3 22.6 27.5 8.6 16.1

Gearing 42.8 40.3 36.1 33.0 31.4 32.9

rOe 27.6 25.7 24.1 21.0 19.4 11.5

Table4

returNONcapital

Generatinghighreturnsoninvestmentsisoneof

thekeyfocusareasatHemas.Table4indicatesthat

depressedmarginshavecausedasignificantdropin

thereturnoncapitalemployed(ROCE)oftheGroup.

However,weareconfidentofreversingthedeclining

trendinreturnsasprofitsfromnewinvestments

begintotakeeffectinthecomingyears.

FinanCiaL rEviEW

Adeterioratinginterestcovercoupledwithan

increasedeffectivetaxratehascausedthe4.8%

dropinthereturnoncapitalemployedtobe

translatedintoa7.9%dropinthereturnonequity

asseeninTable4.Ourmedium-termobjectiveisto

bringthereturnonequity(ROE)backtothe20%

levelsthatwehavebeenenjoyinginthepast,by

furtherimprovingtheprofitabilityofourexisting

businessesandplacingournewbusinessesonthe

roadtoprofitability.

“asayounggirl,irememberhowmymumusedtoslaveatthehouseholdwashing...hoursspentslavingawayatthetap…abarofsoapthathardlylathered...dirtandgrimethatrefusedtobudge...handsredandwornattheendoftheday.

ihelpedher...soiknew!

thenoneday,mumcamehomewiththeshoppingandproudlydisplayedalittlepacketofdivadetergentpowder.

thatwasourfirstexperiencewithwashingpowder...ihadalwaysthoughtthatitwasonlytherichwhocouldaffordthisluxury.mumsaidthiswasontrialandwasn’texpensive.

therestishistory!

Ourfamilyisadivaconvertnow!

asforme,i’mmarried...andrunmyownhome...andibroughtthedivahabitwithmetoo!

Nirmalieperera

SECTOr rEviEW

FMCGTheFastMovingConsumerGoods(FMCG)sector

manufacturesandmarketsconsumergoodsinthepersonal

care,homecareandfoodscategories.Sectorturnoverfor

theyearwasRs.4.6Bnreflectingagrowthof11%overthe

previousyear,whilstProfitaftertaxclosedatRs.534.1Mn,

anincreaseof4%.

thecountry.Adirectmarketingcampaigntostrengthen

Clogardtoothpastefranchiseinhighfluorideareaswasalso

successfullycarriedout.Kumarikamaintaineditsleadership

positioninthehairoilcategorywhilstVelvetsoapincreasedits

shareinthetoiletsoapspace.

ThestarofourHomecareportfoliowasDivawhichrecorded

animpressivevaluegrowthoverthepreviousyear.Diva

strengtheneditsmarketleadershippositioninthehighly

competitivewashingpowdercategorybyincreasingits

volumeshareto28%(Source:March2009-LMRBhousehold

panel).Thebrandwalkedawaywithseveralaccoladesat

theSriLankaInstituteofMarketing(SLIM)BrandExcellence

Awards2008,winningtheGoldawardforLocalBrandofthe

yearandtheSilverawardforProductBrandoftheyear.

ThetransitiontoournewmanufacturingplantatDankotuwa

wascompletedduringtheyearandanumberofinitiatives

launchedtoimproveproductivityandachievecost

efficienciesweresuccessfullycarriedout.Theon-going

5Sprogrammeensuresaclean,clutter-freeenvironment

aimedatpromotingproductivityandreducingwaste.The

HemasInnovationCentreatthefacilitywhichismandated

toprovide“consumercentricproductinnovation”isnow

fullystaffedbyaqualifiedteamofscientists.Internship

opportunitiestolocalandinternationalgraduateshavebeen

providedatthelaboratoryforfulfilmentofresearchcurricula

bringingconsumerinsightsandinnovativeproductideas

intothedevelopmentprocess.

TherecentdepreciationoftheRupeecoupledwiththe

potentialreductionofpurchasingpowerdueto

thefinancialcrisisposesmanyrisksforthe

consumerbusinessintheyearahead.

Theupsideofcourse,liesin

enhancedconsumerdemand

fromtheNorthandtheEast

ofthecountryasaresult

ofbettermarketaccessand

greaterpurchasingpower.We

willcontinuetoenhanceshopper

understandingandintimacy

inordertomeettheneedsof

ourcustomersaswegear

ourselvestobetterfulfillthe

aspirationsofconsumers.

Diva wins gold as Local Brand of the Year

Hemas second strongest distribution reach in the country

Hemas innovation Centre expands r&D activities

REVENUE & NET PROFITAFTER TAXATION (Rs. Mn)6,000

4,500

3,000

1,500

004/05 05/06 06/07 07/08 08/09

RevenueNet Profit after Taxation

600

450

300

150

0

Thisyearposedanumberofchallengestothebusiness

withconsumerdemandbeingdepressedearlyintheyear

duetodoubledigitinflationandsubsequentlydueto

theslowdownintheeconomyonthebackoftheglobal

financialmeltdown.Asaresultthepersonalcareindustry

remainedflat.Thebusinesscontinuedtoinvestbehindits

keybrandsandfocusedonenhancingrelationshipswith

channelpartnersinordertoremaincompetitive.Itisnotable

thatA.C.NielsenrankedHemasashavingthesecond

strongestdistributionreachinthecountry(Source:ACN),up

fromseventhplaceayearago.Thereductionincommodity

pricesinthelatterpartoftheyearandgreaterefficiencies

throughoutthesupplychainhadapositiveimpactonprofits

fortheyear.

OurPersonalcarebrandscontinuedtoholditsshare

amidstintensecompetition.BabyCheramy,ourflagship

brandperformedwellduringtheyearandremainsthe

marketleaderinthecategory.‘DaruPatiyageLokaya’,a

programmetoeducateparentsontheimportanceofearly

childhooddevelopmentsupportedby‘BabyCheramy’was

launchedbytheMinistryofChildDevelopmentduringthe

year,furtherstrengtheningourbondwithmothersallover


iliveinWattala.Whenifellill,idreadedtheprospectoffrequenttraveltocolombotovisitoneoftheprivatehospitalsfortreatment.

ilearnedthathemashadopenedupanewhospitalhereandimadeinquiriesaboutthecareandexpertiseofthepersonnelandthefacilitiesthehospitalcouldprovide.

iwasverypleasantlysurprisedtonotethatanumberofreputedconsultantsconductedtheirclinicsthere.

idecidedtogetmyselftreatedathemas’hospital.treatmentformyillnessnecessitatedthatiundergoahysterectomy,butfirstineededto

haveanmriscan.iwasdreadingthisbecauseiamclaustrophobic.

igotmysecondpleasantsurprisewhenidiscoveredthatthehemashospitalofferedopenmagnetmriscanning...ididn’tneedtoworry!

thishospitalisagreathealthcarefacilityandtheservicewastrulyprofessionalandwarm...itslocationinWattalaisagreatboonforpeopleofthearea.Nolongerdoweneedtospendtimeandmoneytravellingtocolomboanymore.

suranganeekariyawasam

SECTOr rEviEW

HEaLTHCarETheHealthcaresectoroftheGrouptookonanewdimensionduringtheyearwiththeopeningofHemasHospitalsinWattalaandGalle,inadditiontothePharmaceuticaldistributionbusinesswhichhashithertobeenthemainstayofthesector.


3,600

2,400

1,200

0


200

150

100

50

004/05 05/06 06/07 07/08 08/09

ThesectorreportedaturnoverofRs.3.8Bnfortheyearunderreview,whichisa22%increaseoverthepreviousyear.EarningsforthesectorwasRs.73.8MncomparedtoRs.184.5Mn,thepreviousyear.ThedecreaseinearningswasonaccountofstartuplossesoftheHospitalprojectwhichamountedtoRs.98Mn.

ThePharmaceuticaldistributionbusinessachievedaturnoverofRs.3.7Bnfortheyearrecordingagrowthof19%overthepreviousyear.Thiswaswellabovetheindustrywhichregisteredagrowthof12.7%(Source:IMS)duringthesameperiod.ThebusinessfurtherconsolidateditsleadershippositioninthePharmaceuticaldistributionindustry,achievinga16.2%share,upfrom15.2%,thepreviousyear.

Duringtheyear,theCompanyextendeditsproductrangethroughnewproductlaunchesfromexistingandnewprincipals.Asalesforceautomationinitiativeundertakenduringthelatterpartofthefinancialyearwillenablereal-timetrackingofdetailedprimaryandsecondarysalesinformationfromanywhereintheworld.WeexpectthatthiswillenhancesellinganddistributionefficiencieswhilstaddingsignificantvaluetoourPrincipals.

ThefirstHemasHospital,a100-bedfacilityinWattalawasofficiallyopenedinDecember2008.ThehospitaliswellfrequentedbyleadingConsultantscoveringallspecialities.Thishasresultedinasubstantialvolumeofout-patientswhoarenowusingourlaboratory,imagingandotherservicesinincreasingnumbers.MagneticResonanceImaging(MRI)isdoneusingSriLanka’sfirstpatientfriendlystate-of-the-artopenmagnetMRIscannergivingatotallynewexperiencetothepatient.Asthehospitalbuildsitsreputation,thenumberofin-patientshasbeensteadilyincreasing.Already,thehospitalhasgainedpopularityforitshighqualitylaproscopicsurgery,cataractsurgeryandbabydeliveries.‘SuwaSathkam’afixedpricesurgicalpackageisprovingpopularwiththecommunitybecauseofthepredictabilityofcostsandaffordabilitytosurgicalpatients.Theguidedair-flowoperatingtheatresofferpatientsatotallyinfection-freeenvironmentforsurgeries.24-houremergencyandambulanceserviceshavegainedtheconfidenceofthecommunityinaveryshortspanoftime.

Sincere-openinginMarch2009,HemasSouthernHospitalGalle,whichisa50-bedsecondarycarefacilitycaterstoitsloyalpatientbasewithafullrangeofservices.TheHospitalisnowequippedwithtwooperatingtheatresandanIntensiveCareUnit.Thequalityofcareinbothhospitalsisaprimaryfocuswithtrainingprogrammesforallstaffconductedonaregularbasis.

TheensuingyearisexpectedtoseehighergrowthinthesectoronaccountofhighercapacityutilisationofthetwohospitalswhilstthepharmaceuticalsbusinessattemptstoincreaseitspresenceinOver-the-Counter(OTC)products.

Wattala and Southern hospitals commissioned Pharmaceutical distribution business increases market share to 16.2%


theshippingbusinessiseverchangingandwehavetobeconstantlyonourtoesinordertosurvive.Needlesstosay,wehavetoselectbusinesspartnerswhoarereliableandwhomwecandependoninanyemergency.iconsiderourselvesluckytohavefoundabusinesspartnersuchasfarshippinglanka,amemberofthehemasgroup.

Ourcompany,mediterraneanshippingcompanyhasbeenworkingwithfarshippingforlessthanayearasoneofourkeyfeederagents.Wehavebuiltupanexcellentrelationshipduringthisshortperiodandareimpressedwiththeirprofessionalservice,attentiontodetailandtimelyfeedbackandalsoforaccommodatingallofourrequests,sometimesatshortnotice.

shamalperera

SECTOr rEviEW

TranSPOrTaTiOnTheTransportationSectoroftheGroupincludesa

portfolioofservicesinAviation,Maritime,andFreight

Management.

Althoughglobalshippingvolumesdeclinedsignificantly,

feederservicestothesubcontinentsupportingthe

hubstatusoftheColomboportcontinuedtogrow.

FarShippingLtd.,ourfeederagencybusinessthus

performedaboveexpectationtorecordgrowthin

revenuesandprofits.Theacquisitionofastakein

MercantileShippingCompanyPLC,(MSL)whichowns

andoperatesanumberofmulti-purposevessels,

wasmadethisyearasaninitialforayintothevessel

ownershipbusiness.MSLproposestolaunchtwonew

vesselspresentlyunderconstructionduringthenext

year,afirstforaSriLankanship-owningcompany.

Withtheglobaldownturn,theoverallfocusofour

FreightManagementbusinesswastorationalise

resourceswithourinternationalpartnerstoimprove

costefficienciesandcustomerfocus.Thusourfreight

forwardingunitswerebroughtunderHellmanWorldwide

Logistics,anassociatecompanywhichacquireda

controllingstakeinHemasFreight.Ourcouriersegment

hadadifficultyearwithheavypressureonmargins.

Goingforward,thesectorproposestoconsolidateits

businessportfoliointoastructurethatenablesitto

maximisesynergiesandexpandlocallyandregionally.

Weintendtopursuebusinesspartnershipsinthe

maritimesectorincludingportrelatedservicesand

welookforwardtoextendingourreachtothenewly

liberatedNorthandEastofourcountrywhichweexpect

tohavelatentdemandfortransportationservices.

Market leadership in aviation strengthened

Maritime segment performs well amidst global downturn

REVENUE & NET PROFITAFTER TAXATION (Rs. Mn)800

600

400

200

004/05 05/06 06/07 07/08 08/09


200

150

100

50

0

ThesectorrecordedrevenueofRs.679.3Mnanda

profitofRs.163.4Mn,anincreaseof19%and35%

respectively.

Theglobaleconomiccrisishadasignificantimpacton

globaltransportationwithinternationalpassengertravel

growthestimatedtohavedecreasedby11%andfreight

growthby20%fortheyear.(Source:IATAmonthlyMIS

trafficstatistics)presentingachallengingenvironment

forthesectorwhichhas,however,postedadmirable

results.

Ourairlinerepresentationbusinessconsistingoftwo

majorairlinesEmiratesandMalaysiaAirlines(MAS),

wasstrengthenedwiththeadditionofMaldivianAirlines

andRossiyaAirlineswhichcommencedoperationsto

ColomboinNovember2008.Duringthelatterpartof

theyear,MASaddedadedicatedcargofreighterto

theiroperationsfurtherstrengtheningtheMASservice

offering.HemasTravels,ouroutboundtravelbusiness

performedwellunderchallengingcircumstancestopost

asignificantgrowthinturnoverandprofitsthroughits

focusonbroad-basedCorporateandLeisureproducts.


‘Wecouldn’thavebeenhappierwiththeorganisationforthiswonderfulexperience.thedrummers,dancersandthewholeceremonywasfantastic.thankyouformakingourweddingdayinsrilankasospecial.’

‘pleaseconveyourgratitudetoallyourstaffattheclubdolphinhotel.Ourfantasticholidayandweddingwasmade

allthebetterbythewonderfulstaffatthisresort(evendowntothegardenersandmaintenancemen).Wehaveneverbeentosuchafriendlycountryandlookforwardtoreturninginthenearfuture.’

leeanddebbiemilles

SECTOr rEviEW

TheLeisuresectoroftheGroupincludesourdestination

managementcompanyDiethelmTravelSriLanka

(DTSL),formerlythebusinessofHemtours,andthe

SerendibHotelsgroupwhichconstitutesthreehotel

companieslistedontheColomboStockExchange.

topostgoodresultsrecordingan87%occupancy

duringtheyear.Profitshoweverdeclineddueto

exchangelossesasaresultoftheappreciationofthe

RupeeagainsttheSterlingPoundinwhichcurrency

contractshadtakenplace.ThehotelwontheGold

Awardforcustomersatisfactionawardedbytour

operator,FirstChoiceoftheUKforthe4thconsecutive

year.HotelSigiriyaachieving46%occupancy,

althoughupfromlastyear,recordedalossforthe

year.HotelSigiriyawasrecognisedatinternational

forumsforitsinitiativestoreduceitscarbonfootprint

includingwinningaSilverAppleawardedbytheGreen

Organisation-UK.HotelSerendib,Bentotaachieved

55%occupancyfortheyearwhichhoweveronceagain

translatedtoaloss.

Welookforwardwithoptimismtoanewerainthe

leisurebusinessinSriLankaaspeacedawnsonthe

country.Anumberofproductivityenhancingmeasures

undertakeninthelastfewyearsenablethecompanies

toquicklyre-positionthemselvesforgrowthinthe

sector.OurstrategicaffiliationwiththeDiethelmGroup

andMinorInternationalinThailandremainssoundand

providesuswithaplatformforgrowthinthecontextofa

resurgenttourismscenario.

LEiSUrE

Diethelm Travel Sri Lanka (DTSL) takes over the business of Hemtours

Club Hotel Dolphin achieves a record 87% occupancy


900

800

700

60004/05 05/06 06/07 07/08 08/09


36

27

18

9

0

ThesectorpostedrevenuesofRs.938Mn,a1%decline

comparedtolastyear.Thesectorrecordedanetloss

afterminorityinterestsofRs.0.3Mnduringtheyear

vis-à-visalossofRs.6.4Mninthepreviousyear.Overall

performanceofthesectorwasbelowexpectationas

touristnumbersdwindled.

TheleisuresectorinSriLankaexperiencedadecline

of17%inarrivalsduringtheperiodunderreviewdue

totheconflictintheNorthofthecountryaswellasthe

downturninglobaltourismasaresultoftherecessionin

advancedeconomies.

Thedestinationmanagementbusinessenteredinto

astrategicpartnershipwiththeDiethelmGroup

consequenttowhichthebusinesswastransferredto

DTSLwhereHemashasa80%stake.TheCompany

nowcomesundertheumbrellaoftheDiethelm

networkspanning11countriesinAsiafacilitatingbetter

promotionofthedestination.

Theoveralldropintouristarrivalsimpactedtwoofthe

hotelsintheGroupwhileClubHotelDolphincontinued


Whenourvillagecommunityheardofplanstosetupanelectricitypowerplantinourvillage,wewereworried.

Weimaginedahugeplant;drawingoffpreciouswaterresourcesfromthevillage...weimaginedallkindsofotherproblemssuchasnoise...andourwayoflifebecomingseriouslydisrupted.

Well,hemas’Giddawaminihydropowerplanthascertainlygivenourvillageanew

identity...peoplewhopassedusbybefore,nowidentifyusby‘our’powerplant!

thecompanytookallmeasurestominimisedamagetotheenvironmentandevenhelpedusbuildawatersupplysystemandatarredaccessroadtothevillage...andtheairaroundusremainscleanandfreshevenastheyrunthepowerplant.

dingiriBanda

SECTOr rEviEW

POWErThepowersectornowconstitutesa2MWminihydro

projectinGiddawa-Kandy,inadditiontoa50%stake

inHeladhanviLtd.,whichownsandoperatesa100MW

thermalpowerplant.

Theyearunderreviewwitnessedthecompletionof

ourfirstminihydro-powerplantthusinductingthefirst

operationalrenewableenergyprojectintothesector

portfolio.The2MWminihydro-powerplantinGiddawa,

KandywassuccessfullycommissionedinOctober2008.

Sincethen,exceptforafewteethingproblemsthis

planthasbeenoperatingsuccessfullyandtheplant

isexpectedtooperateatitsexpectedcapacityinthe

forthcomingfinancialyear.Preparatoryworkconnected

withthedevelopmentofoursecond1.6MWmini

hydro-powerprojectinMagalgangacommencedduring

theyear.

TheSriLankaSustainableEnergyAuthority(SLSEA)

whichismandatedtopromotedevelopmentof

RenewableEnergyprojectsissaidtohavereceiveda

highnumberofapplicationstosetuprenewableenergy

projectsreflectingthepositivesectorenvironment.

TheintroductionoftheSriLankaElectricityAct,

No.20of2009ineffectleadstoestablishmentofa

strongerregulatoryenvironmentwiththePublicUtilities

CommissionofSriLankaacquiringmoremuscleto

regulatethesector.

Thethermalpowerplantisscheduledtogothroughan

overhaulinthecomingfinancialyearuponcompletion

of36,000hoursofoperationswitharesultanthigh

operationsandmaintenancecharge.Notwithstanding

thefactthatweremaincommittedtoparticipateinthe

thermalsectortofillanysupplygapsinthecountry,

themainfocusofthesectorwillbeondevelopingand

expandingourportfolioofRenewableEnergyprojects.

Heladhanavi exceeds annual MGEa

2MW mini hydro commissioned in Giddawa, Kandy

Magalganga project new addition to renewable energy porttfolio


4,500

3,000

1,500

004/05 05/06 06/07 07/08 08/09


400

300

200

100

0

ThesectorrecordedaturnoverofRs.5.1Bnforthe

yearrealisinganetprofitofRs.245.2Mn.Thisreflects

arevenuedeclineof2%andareductioninnetprofits

by20%,comparedtothepreviousyear.Thedeclinein

turnoverresultedfromtheconsiderablereductioninoil

prices,whichisapass-throughcost,althoughtheplant

performedcommendablyanddespatchedmorethanthe

MinimumGuaranteedEnergyAmount(MGEA).Netprofit

reductionwaschieflyattributedtohigherchargeoutson

OperationalandMaintenance(O&M)cost.

Heladhanavipowerplantisnowintoitsfifthyearof

operations,supplyingpowertotheNationalGrid

througha10-yearPowerPurchaseAgreement(PPA)

withtheCeylonElectricityBoard.WhilsttheFurnaceOil

pricereductionsduringthelatterpartoftheyearshould

havehelpedtostabiliseHeladhanvi’sworkingcapital

financingpressure,theunprecedenteddelaysbyCEB

tosettleduesnegatedthisbenefit,thuskeepingallits

workingcapitalfacilitiesatfull-level.


Minihydro-powerplantatGiddawa.


Asadiversifiedbusinessentitywithconsiderableinvestmentsinawiderangeofsectors,theGroupisexposed

toamultitudeofrisks.Effectivemanagementoftheserisksisessentialtothesustainabilityandgrowthofthe

businessandinsafeguardingtheShareholders’funds.TheGrouphasacknowledgedthenecessityofrisk

recognitionandproactiveriskmanagementgiventhecompetitivebusinessclimateitoperatesin,amidstthe

prevailingturbulenteconomicenvironment.

TheRiskManagementprocessisintegratedwiththestrategicandbusinessplanningframeworkoftheGroup.

EachbusinessunitintheGroupsetstheirgoalsandobjectivesannuallyafteridentifyingandevaluatingtherisks

associatedwiththebusiness.Thiscomprehensiveriskassessmentdefineskeyrisksandweightsprobabilityand

itsimpactonbusinessdrivers.Oncetheriskshavebeenidentified,assessedandprioritised,riskactionsare

takenbasedontheappropriateriskmanagementstrategytoavoid,mitigate,retainortransfertherisk.

TheGroupRiskManagementDivisioniscurrentlyengagedinrollingoutanEnterprise-wideRiskManagement

(ERM)systemtofurtherenhanceandstreamlinetheexistingRiskManagementprocess.

risk exposure

1. slowdownin Potentialimpactonbusinessrevenuesasaresultofdiminishingconsumerpurchasing consumerdemand power.

MitigatingActions• Aligningvaluepropositionswithconsumerpurchasingpower.• Restructurebusinessmodeltominimiseoperatingleverage.• Createrevenuestreamsfromregionaldestinationstoreducedependencyonlocal

markets.

2. Businesspartners Lossofprincipalsandbusinesspartnersduetoglobalmergersandacquisitions,intensecompetition,unsatisfactoryservice.

MitigatingActions• Assessexistingrelationshipandbusinessprocesseswithbusinesspartnersand

developstrategiestomaximisevalueproposition.• Seeknewmarketopportunitiesanddevelopnewalliancestominimiseexposuretoa

singlebusinesspartner.

3. marketrisk Lossofmarketshareormarketleadershipinrelevantsegmentsduetocompetitionfromexistingandpotentialcompetitors.

MitigatingActions• Monitormarketandconsumertrendsandstrengthenmarketpositionsofbrands/

products.• Enhanceproductivity/efficiencytoimprovepricecompetitiveness.

4. costinflation Potentialimpactonprofitabilityasaresultofincreasinginputcostsandoverheads.

MitigatingActions• Focusonincreasingproductivitytoreducecostbase.• Establishrelationshipswithmultiplesuppliersandserviceproviderstoreduce

over-dependencyonsinglesupplier/serviceprovider.• Reviewpricesperiodicallytoensurethatmarginsarepreserved.

riSK ManaGEMEnT


risk exposure

5. Operationalrisk Lossesduetofraud,humanerrors,inefficientprocesses,naturalperils,lossofdataanddisclosureofsensitiveinformation.

MitigatingActions• Maintainobjectivityandindependenceoftheinternalauditandinternalcontrol

function.• Seekcontinuousimprovementofprocessesthroughprocessdocumentation,rootcause

analysis,vendorperformanceevaluation,customersatisfactionmeasurementetc.• DevelopandmaintainaBusinessContinuityPlantoensuredisasterpreparedness

andbusinesscontinuity.

6. regulatoryand Introductionofnewregulationsoramendmentstoexistingregulationsbythe compliancerisk Governmentwhichmaybeadversetobusinessandcomplexityincomplyingwithall

regulatoryrequirements.

MitigatingActions• Participateinindustryforumstolobbyagainstregulationsthatcouldhaveanadverse

impact.• Conductcompliancereviewatsectorandbusinesslevelsquarterlytoensurethatall

businessunitsadheretolegalandstatutoryrequirements.

7. attractionand Potentialimpactonbusinesscompetitivenessduetotheinabilitytoretain/recruit retentionoftalent requiredtalent.

MitigatingActions• Buildastrongemployerbrandimage.• Developahighlyloyalworkforceandattainlong-termcommitmentthroughtraining

anddevelopment,careerplanning,talentmanagementandperformance-basedrewardssystem.

• Ensurecompensationisalignedwithmarket.

8. creditrisk Lossofrevenueduetopaymentdelaysandnon-paymentsfromdebtors.

MitigatingActions• EffectivebusinessspecificCreditPolices.• Regularmonitoringanddebtcollectionprocedures.

9. foreigncurrencyrisk Lossesduetounfavourablemovementsinexchangerates.

MitigatingActions• Ensureeffectivemanagementofexchangeriskthroughcentralisedtreasuryfunctions.

10. Growthrisk Riskofcorebusinessesoftheportfoliobeinginthematurity/decliningphase.

MitigatingActions• Identifystrategiestowinmarketsharefromcompetitors.• Redefinebusinessesthroughnewproductsand/ornewmarketopportunitieswith

potentialforgrowth.• Identifynewbusinessopportunitiesthatleverageoncorecompetencies.

riSK ManaGEMEnT


SUSTainaBiLiTY rEPOrT

DELivErinG SUSTainaBLE vaLUE

tOallstakehOlders

inthissection,wereportonhowhemashas

createdalargersocialwealthanddelivered

valuetoitsmultiplestakeholders.Welookat

howthecompanyhasempoweredcommunities;

createdinspiringandsafeworkplaces;promoted

customerconvenience;andenhancedthequality

ofproductsandservices.

thissustainabilityreportispreparedwiththe

objectiveofprovidinginformationonallaspects

ofouroperations;thetangibleandtheintangible.

throughthisprocesswehopetoenhancethe

transparencyofouractivitiesandcommunicate

withallourstakeholdersinacandidmanner.

thereportisdividedintofivesections.the

firstpartexaminesourgeneralapproachto

sustainablewealthandvaluecreation;the

secondlooksathowthecompanyisempowering

communitiesacrossthecountry;inthethirdwe

examinehowwearebuildingsafeandinspiring

worksplaces;thefourthlooksatourapproachto

nourishingthephysicalenvironment;andinthe

fifthwelookathowwerespondedtocustomer

expectationsandenrichedthemarketplace.

BalaNciNGsOcialaNdecONOmicWealthcreatiON

Asoneoftheleadingcorporatesinthecountry,

weareconsciousofourlargersocialobligations

andmakeeveryefforttobalancethegeneration

offinancialwealthwiththegenerationofanequal

shareofsocialwealth.Intheprocess,ourgoalisto

deliveroutstandingproductsandservicestoallour

customersanddeliversustainablevaluetoallour

stakeholders.

Inthisprocessofsustainablewealthcreation,Hemas

hasbeeninspiredbysomekeyvalues:

1. Nevercompromiseonquality.Ensurethat

customersalwayshaveaccesstothehighest

qualityproductsandconstantlyinnovateto

ensurehigherqualityandbetterproducts.

2. Encourageinnovationandcreativityatthe

workplace.Ensurethatemployeesarerewarded

forinitiative,buildacommittedanddedicated

teamandmakeworksatisfyingandharmonious.

3. Ensurethatperformanceandproductivitymatch

creativityandinnovation.Integrateoursystems

andprocedurestoensureoptimumlevel

performance.

4. Donotcompromiseonintegrityandhonesty.

Practicethehighestlevelsoftransparencyand

complianceandensurethatlawandregulations

arefollowedinletterandspirit.

5. Integratetheinterestsofallstakeholdersinto

allouractivities.EnsurethattheCompany’s

entrepreneurialactivitieshavepositivemultiple

impactsonallgroupsweareengagedwith.

pushiNGtherespONsiBilityBar

Ensuringsustainablevalueforallstakeholdershas

meantthattheCompanycontinuallymodifiesand

adaptsitssystemsandprocesses.Itmeans

re-envisioningofstrategy,rethinkingof

implementationmethodsandachangeincorporate

mindsetatalllevels.Thisisanongoingprocessand

everyyearHemasraisestheresponsibilitybarhigher.


PartoftheobjectiveofthispartoftheAnnualReport

thenistoreceivecriticalandconstructivefeedback

fromourstakeholderssothatwecancontinueto

honeandpolishoursystemsandprocesses.

thecOmmuNity

empOWeriNGtheNextGeNeratiON

Buildingasafeandhappyenvironmentforchildren

hasbeenatthecoreofourcommunityworkand

theCompanyhasfocusedoncreatingspacesfor

childrentogrowinsecureandsatisfyingways.

‘piyawara’

NurturingtheVeryYoung

Oneofourmainprogrammesinthisareaisthe

‘PiyawaraProject’whichissupportedbytheHemas

OutreachFoundation,aregisteredcharity.The

missionofthePiyawaraProjectistonurtureyoung

childrenwithgoodcareinordertoprovideasolid

foundationforalife-longjourney.

ThePiyawaraprogrammeisundertakenin

partnershipwiththeMinistryofChildDevelopment

&Women’sEmpowerment,andfocusesonfivemain

areas:

Enhanceandimprovethepsychosocialand

cognitivedevelopmentofyoungchildrenthrough

additionofnewpreschoolstotheexistingnational

networkandupgradingestablishedpreschoolsto

reachminimumstandards. Fulfilthetrainingrequirementsofpreschool

teachers. Empowercommunity-ledsocialdevelopment

throughisland-wideparentalawareness

programmes.

myserviceasasoldierintheNorthofsrilankashowedmehowdifficultlife

couldbecomeforpeople...particularlylittlechildren.

Nowretired,iamfulfilledandhappytobeworkingwithinthehemasOutreachinitiative,assistingsomanychildrenalloversrilanka.

thepreschoolandplayareaswhichthehemasfoundationhassetupatthemenikfarminchettikulamhassurroundedtheinternallydisplacedchildrenwithachild-friendlyenvironmentthatgeneratesmuchhappinessforthem.

mostofthechildrenaretraumatisedbyconflictandplacingthemwithinacaringatmosphereisavitalfirststepontheroadtorehabilitation,reconciliationbetweencommunitiesandliveslivedinharmony.

dissanayake

AtapreschoolatGantalawa,Kantale.



Improvechildren’srecreationalfacilitiesin

disadvantagedcommunities. Improvechildprotectionlegislationandcreate

awarenessofchildren’sissues.

Sofar,32preschoolsinareasaroundthecountry

havebenefitedfromthisprogramme.Theschools

havebeenprovidedwithsafeandpleasantplay

areas,cleantoiletsanddrinkingwaterfacilities,basic

playequipment,newdesks,chairsandcupboards.

Theprojectalsosupportsthetrainingofteachers

inearlychildhooddevelopment.Parent-Teacher

Associationshavebeensetupinalltheseschools

andthecommunityhasalsobeenintegratedinto

theprocesstobuildinasenseofownershipandto

ensuresustainabilityoftheprogramme.

Tohighlighttheimportanceofearlychildhood

development,severaleducationalprogrammes

wereconductedforparentsattheseschools.The

Companyhasalsousedtheelectronicmediato

promoteearlychildhoodeducationonpopular

televisionchannels.Amongthekeyactivitiesforlast

yearwere:

1. Theopeningapreschoolinavillagecalled

GantalawainKantale.Thisisastate-of-the-art

preschool,builtatacostofRs.6Mn,and

providesfacilitiesfor110children.

2. Theopeningofastate-of-the-artpreschoolin

Kalutara,builtatacostofRs.6.5Mn.

Thepreschoolprovideseducationfor

approximately75children.

3. Theopeningofapreschoolandplayarea

fortheinternallydisplacedinVavuniyainthe

ChettikulamMenikFarmvillage.About290

childrenusethisfacilityonaregularbasis.

4. Thetrainingof600preschoolteachersinrural

areasonearlychildhoodcareanddevelopment.

Three-daytrainingprogrammeswereheldin

severalruralareas.

5. Theopeningofamuchneededchildren’s

parkinMaligawattaatacostofRs.1Mn.

Approximately400childrenfromtheareause

thisparkregularly.

6. ‘BabyCheramy’developedadocudramato

educateyoungparentsontheimportanceof

earlychildhoodcareatacostofRs.8Mn.

Thedocudramaiscurrentlybeingusedbythe

MinistryofChildDevelopmentandWomen’s

Empowermenttoeducateparentsthroughout

thecountry.Itisalsobeingusedinmaternal

clinicstoeducateyoungmothers.

‘Piyawara’wasfirstlaunchedin2002when

HemasjoinedforceswiththethenMinistryofChild

DevelopmentandWomen’sEmpowermenttoprovide

qualitypreschooleducationtochildrenacrossSriLanka.

Inthefirstphaseoftheproject,12preschoolsfrom

JaffnaintheNorthtoHambantotaintheSouthwere

established.Inthewakeofthedevastatingtsunami

of2004,Hemasprovidedtemporarypreschoolsin

make-shiftcamps,andsubsequentlyconstructed20

preschoolsintsunami-affectedareasatacostof

Rs.120Mn.

Duetoitscontributiontoearlychildhoodcare

anddevelopment,Hemaswasappointedbythe

GovernmenttotheNationalCoordinationCommittee

onEarlyChildhoodCareandDevelopment(ECCD),

whichisresponsiblefordesigningandimplementing

thenationalpolicyonECCD.

Bringingnormalcytothelivesofdisplacedchildren

Childrensufferimmeasurablyfromtheconsequences

ofwar.Thecountryiswitnesstoseveralstoriesofchild

trauma:landmineinjuries;childrenwhohavelostboth

parents;andotherswhohavenothadanopportunity

toseekadecenteducation.The30-yearoldconflict

hasledtothousandsbeingdisplaced,sometimes

severaltimesover,manyofwhomarechildren.

HandingoverdocudramatoHon.MinisterofChildDevelopmentandWomen’sEmpowerment.



TheHemasOutreachFoundationinpartnershipwith

theMinistryofChildDevelopmentandWomen’s

Empowermenthasinitiatedaprojecttohelp

displacedandtraumatisedchildrenovercomethe

emotionalscarsthatravagedtheirearlylivesandto

providethemwithhopeforthefuture.

Aspartofthisprogrammethefirstpreschoolwas

openedinMenikFarm1inChettikulaminApril2009

andabout290childrenmakeuseofthispreschool.

ChettikulamislocatedintheVavuniyaDistrict

overa1,500-acreareaandistemporaryhometo

approximately200,000+displacedpeople.

myhomeisindankotuwa.lifewasreallydifficultformyfamily…myparentswerebothailing…noone

wasearningafixedincome…oftentherewasnofoodonthetableandwewentwithoutmanyameal.

iwasdesperatelysearchingforemploymentwheniheardofanopportunitytoworkforhemasattheirdankotuwafactory.ineededthejob…butiwasalsoworriedaboutworkinginahugefactorywhereididn’tknowanyone.

thiswasoneandahalfyearsago,wheniwalkedintohemasasasupportforceworker.

verysoonicametorealisethatmyfearsweregroundless.Wewerealltreatedasamemberofthehemasfamilyandtaughtnecessaryskillstodoourjobswell.ialsolearnedabouttheefforttakentoensuretherewasnopollutiontotheenvironmentalthoughihadheardotherwise.

iamreallyhappythattoday,icanensurethatmyfamilyenjoys3mealsaday,whichicanprovidethroughmyincome.

furthermore,ihaveenrolledmyselfforanexternaldegreeprogrammeintheartsstreamatthekelaniyauniversity.

iamreallyhappythatmyfuturehasbeguntolooksomuchbrighter.

Niroshalakmali

Rs.400,000/-wasinvestedbytheFoundationto

constructthepreschoolandplayareaforthechildren

ofthisfacilityandtheMinistryfacilitatedthetraining

oftheteachers.Thechildrenaretaughtpre-writing

andreadingskills,andareexposedtocreative

learning.Theteachersareprovidedtraininginboth

earlychildhoodeducationandtraumacounselling.

Thereareapproximately6,000childreninZone1

alone,ofwhichalmost600areofpreschoolage.

TheHemasOutreachFoundationisnowlooking

replicatingthismodelintheotherthreezones

developingthreemorepreschools.TheFoundation’s

focusonpreschoolsisdrivenbyresearchthat

indicatesthatearlychildhoodeducationinthefirst

sixyearsoflifeinfluencesachild’slifetimeeducation

andsocialachievement.

ChildrenatplayatourfirstpreschoolsetupinChettikulamforchildrenaffectedbywar.



ThroughinitiativesofthisnatureHemashopes

tobringasenseofnormalcytothelivesofthese

childrenbycreatingenvironmentsthatarephysically

attractiveandmentallystimulating.Inadditionby

helpingthesechildrenovercomethetraumaof

war,thepreschoolsaimtodevelopthelanguage,

cognitiveandsocialskillsthatwouldpreparethese

childrenforprimaryschool.Thelong-termgoalisto

investinourfutureandcreatecitizensequippedand

motivatedtocontributetobuildingournation.The

newpreschoolswillbeestablishedwithfundsfrom

theHemasOutreachFoundationandotherdonor

contributions.

theWOrkplace

stimulatiNGcreativity,BuildiNGBONdsaNdreWardiNGperfOrmaNce

attheworkplacewehavefocusedonfivethings:

Buildingateamthatisbondedbyacommon

commitmentandvalues

encouraginginnovation

encouragingproductivityandperformance

rewardingperformance

Workplacesafety

helpingemployeestobuildtheircareer

training

TheCompanyhasadoptedacompetencydevelopment

frameworkforallstaffwhichislinkedtotheemployees’

annualperformancereview.Theperformancereview

identifiesthoseskillsandcompetenciesthatneed

strengtheningandthetrainingprogrammesthatare

tailoredtomeettheseneedsprovided.Everyemployee

participatesinaperformanceandcareerdevelopment

reviewtwiceayear.

Duringtheyearthe‘HemasHigherLearningAcademy’

wasestablishedasaseatoflearningforthegroup.

A‘ManagementDevelopmentProgramme’was

conductedforthejuniormanagersduringtheyear

underreview.Thissixmonthprogrammewas

conductedbythe‘HemasAcademy.’Twentynine

participantsfromsixsectorspassedoutasthe

firstbatchofthisprogramme.Thepurposeofthis

programmeistogroomthejuniorleadershiptotake

upseniorpositionsintheCompany.

iwasbarelybeyondmystudentdayswhenijoinedhemasin1997asanaccounts

clerk.infactiwasstillstudyingwhilstlookingaroundforagoodjobwithagoodcompany...that’swhenichosehemas.

manyyearslater,irealisedthathemasalsochosemeatthattime...todevelopandnurturemytalentsandskillsanddevelopmeasapersoninadditiontobeingaproficientemployee.

so,whileiworkedistudied...whileistudiedialsoimbibedthehemascultureanddiscipline...andprogresseduptheladder...fromaccountingandfinancetosupplychainmanagement...untilin2007,ilandedthejobi’minnow...headofsupplychainofhemaspharmaceuticals.

Whatcanisay...exceptthatitwasthecultureathemasthatplacedsomuchtrustandconfidenceinme,whichlentmethewingstoachievewhatihave.

shanthaBandara



recruitmentandrewardsTheCompanyseekstorecruitandretainthebest

availabletalent.Thehumanresourcepolicyofthe

Companyisdesignedtoachievetheseobjectives.

Weenforcedtightercontrolsintherecruitment

processtorationalisethenumberofgroupwidenew

recruitsandtoensurethatweattracthighquality

employeescompatiblewithourorganisationalculture.

Whilestrategicallymanagingthegrowthinthenumber

ofemployeeswehaveendeavouredtoimprove

productivityandperformancelevelsacrossthegroup.

ThepolicyoftheCompanyistoidentifypotential

leaderswithintheGroupandtoprovidethemwith

necessarysupportandincentivesforthemtoassume

positionsofleadershipwithintheCompany.

thehrinformationsystem

TheCompanyrecentlyinvestedinafullyintegrated

HumanResourceManagementSystem(HRMS).The

HRMShastakenoverthetransactionalprocesses

inthemanagementoftheemployeelifecycle,and

changedtheroleoftheHRteamwherefocuswould

beonHRtransformationalprocessessuchastalent

management,successionplanningandemployee

developmentforwhichtheHRMSwillbeusedasa

strategictool.

Workplacesafety

TheCompanyhasimplementedtheadvanced

‘5S’conceptwhichaimstoenhancesafetyand

productionlevelsandpromotegreaterawareness

ofenvironmentalissues.Wecontinuetoadaptour

practicesinordertoimprovesafetylevelsatthe

workplace.Buildingsafeandharmoniousworkplaces

isakeycorporategoal.

the‘livinghemasvalues’award

TheCompanyisdrivenbycorevaluesbasedonthe

visionofitsfoundersandthesevalueshaveplayed

animportantroleintheorganisation’ssuccess.

Thesecorevaluesare:

Passionforcustomers

Obsessionforperformance

Drivenbyinnovation

Concernforpeople

Everyyearemployeesgetanopportunitytonominate

oneoftheirpeersforthe‘HemasValues’award.The

Companyselectsawinnereveryquarterandthena

GrandWinnerfortheyear.Theawardrecognisesthe

rolethattheemployeehasmadeinpromotingthe

Hemasvaluesthroughhis/heraction.Nominatorsare

alsorecognisedforsuccessfulnominations.

theeNvirONmeNt

keepiNGOureNvirONmeNtcleaNaNdGreeN

Environmentalpreservationandreplenishmentarean

integralpartofourbusinessstrategy.TheCompany’s

approachtosustainablebusinessisshapedvery

closelybyitscommitmenttopreservingnature’s

richesforthenextgenerationandbeyond.Allofour

systemsandprocesseshavebeenalignedtoensure

thatthisbusinessgoalisnotcompromisedandevery

yearweseektopushthisbarhigher.

Wastemanagementatdankotuwa

TheCompany’smanufacturingfacilityinDankotuwa

hasnowinstalledastate-of-the-artwastewater

managementsystem.Everydaythefactory

dischargesapproximately60,000litresofwaste

waterasaresultofthefactoryproductionprocesses

andfromemployeeusage.

TheCompany’sfactoryusestwotypesofwater

treatmentplantsforthetwodifferenttypesof

wastewater.Industrialwastewateristreatedusing

chemicalswhilehumanwastewateristreatedthrough

amicrobialdigestingprocess.Treatedwaterfromboth

thesesourcesisthenusedtoirrigatethefactory’s

gardensandthusreducetheuseofpipebornewater

forthispurpose.


GraduatesoftheHemasManagementDevelopmentProgramme.


energyGenerationwithminimumimpact

Heladhanavi

TheCompany’smakeseveryendeavourtoensure

thatitspowergenerationactivitiesareconducted

inaccordancewiththeapplicableenvironmental

regulationsandcauseminimumdamagetothe

environment.

TheCompany’sHeladhanavipowerplantlocated

inthePuttalamDistrictwasonlyestablished

consequenttoanenvironmentalimpactassessment

(EIA).Theplantisoperatedinaccordancewiththe

stipulationscontainedintheenvironmentalprotection

licencegrantedbytheEnvironmentalAuthorityofthe

North-WesternProvincialCouncil.Noiselevelsatthe

Heladhanaviplantaremonitoredbyourownin-house

technicianstwiceamonth.Athirdpartyassessment

ofnoiselevelstakesplacetwiceayearandprovides

anindependentverificationofourprocesses.

EveryyeartheEnvironmentalAuthorityoftheNorth-

WesternProvincialCouncilcarriesoutitsown

independentassessmentandrenewalofthelicenceis

doneonlyaftersuchaverificationprocesstakesplace.

Wastewatergeneratedbythepowerplantis

treatedandtheheavyoilcontainedinsuchwateris

separatedbeforethewaterisreleasedtotheopen

environment.

SpecialminilakeshavebeenbuiltbytheCompany

forrainwaterharvesting,especiallysincethe

PuttalamDistrictreceiveslessthanaveragerainfall.

Therainwatersoharvestedisusedformultiple

purposesduringthedryseason.

TheCompanyhasalsotakenspecialmeasures

toplantover500treesinthecompoundandwill

continuewithadditionaltreeplantingactivitiesin

theyearstocome.Thisisinadditiontoa25-foot

thickgreenbeltthatsurroundstheperipheryofthe

powerfacility.Thedryleavesfromthetreesareused

ascompostwhichinturnisusedasmanureforthe

treesandplantswithinthefacility.

Whenithinkofthesigiriyarock,oneoftheworld’sgreatestmarvels,ithink

ofamajesticrockfortress,risingfromthejungleinanenvironmentthathasnotseentoomuchofthehandofman!

Whenyouassociatetheword‘hotel’with‘sigiriya’youthinkofdisruptionandpollutionoftheenvironment...buildingsandpeopleandcommercialisationspoilingthetranquillity.

Butmyvisittohotelsigiriya,underhemasmanagementwasarevelation.isawthattheyhaddoneanexcellentjobinprotectingtheenvironment,whilstbuildingafirstclasshotel.

thetrainingprogrammethehotelstaffconductedatourschooltaughtushowwecouldalsoprotecttheenvironmentinourownlittleway.thiswasoneofthemostinterestingclassesihaveattendedinschool.

deepthikakumaridissanayake



Giddawa

TheGiddawapowerplantintheKandydistrict,

commencedoperationsin2008providingclean

energytothenationalgrid.Theprojectcommenced

onlyafteraproperenvironmentalstudyasstipulated

bytheCEAwascarriedout.Theplantisoperated

inaccordancewiththestipulationscontainedinthe

environmentalprotectionlicencegrantedbythe

CentralEnvironmentalAuthority.

Specialprecautionsaretakentoensurethatthereis

aminimumresidualwaterflowintotheadjoiningriver.

TheCompanyhasalsoinvestedinthedevelopment

ofroadsintheareaandenabledmanyfromthelocal

communitytogainemploymentwithintheplant.

energysuppliedtotheNationalGridin2008-09

Heladhanavithermalpowerplant695,750,000kWh

Giddawahydropowerplant2,208,963kWh

sustaiNaBleleisure

hemasisstronglycommittedtodevelopingand

promotingasustainableleisureindustryin

srilanka.Wehaveovertheyearssoughtto

balancetheinterestsoftheleisureseeker,thelocal

community,thehotelemployee,theleisureindustry

ingeneralandthenaturalenvironment.Our

businessstrategyinthisareahasbeentocreate

win-winsolutionsforallthesedifferentinterests,

butensuringultimately,thatthejoysofnatureare

preservedforthenextgeneration.asakeyplayer

insrilanka’sleisureindustryweunderstandthat

wemustdischargeourresponsibilityandpromote

inter-generationaltourism.

‘Greening’hotelsigiriya

HotelSigiriya,isathree-starresorthotelofthe

Grouplocatedinaneight-acregardenintheCentral

ProvinceofSriLanka.Thehotelisastone’sthrow

fromthemajesticSigiriyaRock,the5thCentury

citadelofKing,Kashyapa.

In2005,thehotellauncheda‘greeningproject’to

ensurethatitsactivitiescauseminimumharmand

helpspreserveandreplenishthenaturalenvironment.

Thegoalofthegreeningprojectwastopromote

environmentallysustainabletourismbyintegrating

theconceptintotheCompany’sdailypractices.The

projectaimedspecificallyto:

Conserveenergyandwater. Minimisesolidwastepollution,airpollutionand

chemicalpollution. Integratepracticesofreducing,recyclingand

reusing. Maximisetheuseofenvironment-friendlymaterials Maximiseindigenousflorainlandscapingand

eradicateinvasivealienspecies. Conservebiodiversityandsupportlocallivelihoods.

Throughcontinuingtrainingprogrammesthe

staffinthehotelhasbeeninspiredtointegrate

environmentally-friendlypracticesintoallaspectsof

thehotel’soperations.

Thefollowingaresomeofthebestpracticeswehave

adopted:

Aselfcontainedbiologicalsewerageplant.

Nochemicalsareusedandtheplantistotally

self-contained.Treatedwaterisusedforgarden

irrigationandthedriedsludgeisusedasmanure. Approximately30,000litresoftreatedwaterper

dayisusedforirrigation.Solarwaterpanelsforheating.Acardkeyforroomair-conditioning.Scheduledswitchingoflights.Watersavingcisterns.Optionalreuseofroomlinen.ChangefromincandescenttoCFLlighting.Anorganicvegetablegardenwhichdoesnot

usechemicalfertilizers.Margozaoilisasan

insecticideandsludge-compostfromour

treatmentplant-isusedasmanure.

OrganicgardenatSigiriya.



Reducedusageofaerosols.Reduceduseofplastic.Composting,bothconventionalcompostpitsand

vermi-compostpits.Gradationandrecyclingofgarbage.85%ofthe

wetgarbageand75%ofdrygarbageisrecycled.

Onlyabout5%oftotalgarbageisdisposed

withoutsomeformofrecycling.Abiomassfuelled‘gasifier’toreplacethediesel

boiler.Treeconservation.194maturelargetreesand

359mediumandsemi-maturetreeshavebeen

protectedwithinthepremises.Anewopenplanrestaurantwasbuiltin2006.

Notreeswerecutduringconstructionandno

airconditioningorfansareused.

themarketplace

shapiNGaNdBeiNGshapedBymarkets

hemasisacustomer-drivencompanyandour

goalistodeliveroutstandingproductsand

servicestoourcustomerswithpassionandverve.

atthesametimeweseektodriveandinspire

themarketwithourinnovationandproductand

servicequality.

customerfeedback

Customerfeedbackisoneofthemainmethodsthe

Companyusestoimprovethelevelsofitsproducts

andservicesandrespondtocustomerdemandsand

expectations.

HemasHospitals

HemasHospitalsusescustomerfeedbackformsto

measureandmonitorcustomersatisfactionlevels

ofin-patientsandout-patients.Thisisdoneevery

day.Out-patientsareencouragedtofillinaform

beforetheyleaveandallin-patientsareprovidedwith

feedbackforms.

DiethelmTravels

DiethelmTravelsusessimilarfeedbackformsto

obtainanassessmentofclientsatisfactionlevels.

Everytourandexcursionbookedthroughtheagency

clientstorespondandtheseresponsesarethen

evaluatedbyourstaff.

SerendibLeisure

SerendibLeisureusesavarietyofmethodstoobtain

customerfeedback.Allclientsareencouragedtofill

directquestionnairesandthisprovidesafirsthand

accountofsatisfactionlevels.Regularmeetingsare

alsoheldbetweenhotelmanagementstaffandthe

touroperatorsandguidesandthisprovidesanother

formoffeedback.TheCompanyalsoconstantly

reviewscommentspostedontravelblogsandthese

commentsalsoprovideuswithusefulfeedbackon

ourlevelsofservice.

LastyearClubHotelDolphinwasawardedthe

GoldAwardfromtheUnitedKingdom’slargesttour

operator,‘FirstChoice’.Theawardisbasedsolelyon

customerfeedbackandthisisthefourthconsecutive

yearthatthehotelhasreceivedthisaward.



TheBoardofHemasHoldingsPLC(Company)is

committedtomaintainingthehigheststandards

ofcorporategovernance,inlinewiththeCodeof

BestPracticeonCorporateGovernanceformulated

throughthejointinitiativesoftheSecuritiesand

ExchangeCommissionofSriLankaandtheInstitute

ofCharteredAccountantsofSriLanka,whichare

applicabletolistedcompaniesviatheListingrulesof

theColomboStockExchange.

SetoutbelowisasummaryoftheCompany’s

corporategovernanceprincipleswhichwerein

placethroughoutthereportingperiod.TheCompany

complieswiththeKeyprinciplesoftheupdated

Code,exceptwheredisclosedbelow:

1.laysOlidfOuNdatiONfOrmaNaGemeNtaNdOversiGht

1.1BOardrOlesaNdrespONsiBilities

TheBoardhasformaliseditsrolesand

responsibilitiesintoaBoardCharterwhichin

summary,includethe:

reviewandapprovalofCompanystrategy;

performancemanagementwithspecific

responsibilityforthemonitoringofCompany

performanceandoverallconduct;

evaluationoftheprincipalrisksoftheCompany

andcontinuedmonitoringofappropriaterisk

managementandreportingsystems;

establishmentandmonitoringofpoliciesto

ensurecompliancewiththelegalandregulatory

regimestowhichtheCompanyissubjectand

toensurethehigheststandardsofcorporate

conduct;and

promotionofopenandpropercommunication

betweentheCompanyanditsstakeholders.

1.2deleGatiONtOseNiOrexecutives

TheBoardhasdelegatedcertainresponsibilitiesto

seniorexecutivesincludingtheday-to-dayoperation

andadministrationoftheCompany.TheBoard

Charterclearlyspecifiesthosemattersthatare

reservedfortheBoard.

1.3appOiNtmeNt,iNductiONaNd

perfOrmaNceevaluatiONfOrseNiOr

executives

Uponappointment,seniorexecutivesareprovided

withformallettersofappointmentsettingouttheir

termofoffice,duties,rightsandresponsibilities,and

entitlementsontermination.

Aninductionprogrammeisinplaceforallnewsenior

executivestoprovidethemwithknowledgeofthe

Company’sfinancialposition,strategies,operations,

policiesandriskmanagementprocedures.

TheBoard,basedonrecommendationsfromthe

RemunerationCommitteedeterminestheCEO’s

KeyPerformanceIndicators(KPIs)annuallyand

reviewsperformanceagainsttheseonanongoing

basis.TheCEO,underthedelegatedauthorityof

theBoard,determinestheKPIsofseniorexecutive

teammembersandreviewstheirperformanceonan

ongoingbasis.

1.4rOtatiONOfdirectOrs

AteachAnnualGeneralMeetingone-thirdofthe

Directorsretirebyrotation.ADirectorappointedto

fillacasualvacancyholdsofficeonlyuntiltheAnnual

GeneralMeetingwhichfollowsandshallthenbe

eligibleforre-election.Non-ExecutiveDirectorsare

appointedforathree-yearterm.Their

reappointmentisatthediscretionoftheBoard.

2.structuretheBOardtOaddvalue

2.1BOardcOmpOsitiON

Asat31March2009,theBoardcomprised

theIndependentNon-ExecutiveChairman,two

IndependentNon-ExecutiveDirectors,one

Non-ExecutiveDirectorandfourExecutiveDirectors.

DetailsofDirectorsincludingtheirqualificationsand

experienceandinformationonotherDirectorships

heldbyeachmemberoftheBoard,canbefoundin

theBoardofDirectors’sectionandintheNotesto

theAccounts.

EnTErPriSE GOvErnanCE

STEWarDSHiP


TheBoardcomprisesmemberswithabroadrange

ofskillsandexperience.TheBoardconsidersit

importantforthefollowingskillsandexperiencetobe

representedontheBoard:

experienceasaChiefExecutive;

internationalbusinessexperience;

financialexperience;

marketingexperience;

legalandregulatoryexperienceand;

corporategovernanceandriskmanagement

experience.

TheBoardannuallyreviewstheskillsandexperienceof

itsmembersanddecidesonwhetheranyactionneeds

tobetakentoaugmentorcomplementthoseskills.

Withaviewtoensureabalanceofauthorityand

influence,therolesofChairmanandChiefExecutive

OfficerhavebeendividedbetweentwoBoardDirectors.

2.2accesstOiNfOrmatiON

Directorsreceivemanagementpresentationsduring

theyearwhichallowsthemtheopportunitytopose

questionsabouttheCompanyandfactorsimpacting

orlikelytoimpactthebusiness.Directorsarealso

entitledtorequestadditionalinformationwhere

theyconsidersuchinformationnecessarytomake

informeddecisions.

2.3cOmpaNysecretary

TheCompanySecretaryplaysapivotalrolein

ensuringcompliancewithproceduresandapplicable

statutesandregulations.Theactivitiesinwhichthe

CompanySecretaryengagesincludes,interalia:

inductionofnewDirectors;

assistingtheChairmanandChiefExecutive

Officerindeterminingtheannualboardplan;

assistingwithotherstrategicissuesofan

administrativenature;

facilitatingfullandtimelyaccessbyDirectorsto

allinformationsuchascorporateannouncements,

investorcommunicationsandotherdevelopments

whichmayaffecttheGroup;

guidingtheBoardandindividualDirectorsinthe

properdischargeoftheirresponsibilities;and

actingasacentralsourceofguidanceonmatters

ofethicsandgovernance.

AllDirectorsofHemasHoldingsPLCmayliaisewith

theCompanySecretaryonagendaitemsforBoard

meetings.Whereappropriate,theDirectorsmayalso

consultwithindependentprofessionalsandadvisers.

TheCompanySecretaryisfurthermoreresponsible

forensuringthatallmeetingsofshareholders,

DirectorsandBoardSubcommitteesareproperly

recordedaspertherequirementsoftheStatutes.

2.4BOardmeetiNGs

TheBoardmeetsregularlyandduringthefinancial

yearended31March2009,theBoardmetatotalof

7times,whichincludedmeetingsfocusedon

strategyandbudget.Thenumberofmeetings

attendedbyeachDirectoristabulatedbelow:

Directors No.ofMeetingsAttended

DeshamanyaL.DeMel* 7

Mr.H.N.Esufally 7

Mr.A.Esufally 6

Mr.I.Esufally 7

Mr.M.E.Wickremesinghe* 7

Mr.M.Esufally 7

Mr.P.Mohapatra* 6

Mr.D.Bhatnagar** 5

* IndependentNon-ExecutiveDirectors** Non-ExecutiveDirector

2.5directOriNdepeNdeNce

AllDirectors,whetherindependentornot,bring

animpartialjudgmenttobearonBoarddecisions

andaresubjecttotheBoard’spolicyregarding

managementofconflictofinterests.

TheBoardannuallyassesseseachofthe

Non-ExecutiveDirectorsagainstspecificcriteriato

decidewhethertheyareindependent.Inmaking

suchanassessment,considerationisgivento

whethertheDirector:

isasignificantshareholderoftheCompanyoran

officerofasignificantshareholderoftheCompany;

hasbeenemployedintheCompanyorits

Subsidiaryinanexecutivecapacityinthelasttwo

yearsimmediatelyprecedingappointmentasa

Director;



isamaterialsupplierorcustomeroftheCompany

oranysubsidiaryoftheCompany;

hasanymaterialcontractualrelationshipwith

theCompany(otherthanasaDirector);whether

directlyorindirectly;and

isfreefromanyinterest,businessorpersonal,

whichcouldorcouldreasonablybeperceivedto

materiallyinterferewiththeDirector’sabilitytoact

inthebestinterestsoftheCompany.

Havingconsideredthese,theBoardwasoftheview

thattherewerenofactorsaffectingtheindependent

statusofanyNon-ExecutiveDirectorat31March

2009orthroughouttheyear.

2.6chairOftheBOard

TheChairmanisresponsiblefortheleadershipofthe

Board,ensuringeffectivenessinallaspectsofitsrole

including:

settingBoardmeetingagendas;

conductingandleadingBoardmeetings;

conductingandleadingshareholdermeetings;

and

beingthemainpointofcontactbetweenthe

BoardandtheCEO.

2.7BOardcOmmittees

TheBoardisassistedinfulfillingitsresponsibilities

bytwoBoardsubcommittees,governedbyCharters,

whichhavebeenapprovedbytheBoard.Theyare

theAuditCommitteeandRemunerationCommittee.

Membersareappointedforathreeyearterm(or

shortertimeastheyremainintheofficeofDirector)

andsubjecttocontinuingtobeaDirector,areeligible

forreappointmentattheendoftheirterm.

Anoverviewofthecompositionandresponsibilities

ofeachoftheBoardCommitteesisprovidedbelow:

2.7.1auditcommittee

Asat31March2009,theCommitteecomprisedtwo

members,bothofwhomareIndependent

Non-ExecutiveDirectors.TheCommitteeischairedby

anindependentchairwhoisnottheChairofthe

Board.ThecurrentCommitteeMembersare

Mr.MaithriWickremesinghe(Chairman)and

Mr.PradiptaMohapatra.TheMembersofthe

CommitteearefinanciallyliterateandtheCommittee

possessessufficientfinancialexpertiseandknowledge

oftheindustryinwhichtheCompanyoperates.

TheCommitteemetfivetimesduringtheyear.TheCEO

andtheCFOparticipatedatthesemeetingsbyinvitation,

withtheCompanySecretaryinattendance.Priortothe

scheduledCommitteeMeetings,separatemeetingsalso

tookplacebetweentheChairmanoftheCommittee

andboththeCompany’sExternalandInternalAuditors.

Attendancebyitsmembersatmeetingsisgivenbelow:

Member No.ofMeetingsAttended

Mr.M.E.Wickremesinghe 5

Mr.P.K.Mohapatra 5

Mr.H.NEsufally(CEO)* 5

Mr.M.Arsakularatne(CFO)* 5

*AttendsbyinvitationandisnotaMemberoftheCommittee.

TheCommittee’sresponsibilitiesinclude:

evaluatingandmonitoringtheCompany’sinternal

controlenvironmentandriskmanagement

function;

overseeingandreviewingthescope,qualityand

costoftheinternalandexternalaudits;

reviewingthereportspresentedtotheCommittee

byboththeAuditorsandManagement;

recommendingtotheBoardtheappointmentof

InternalandExternalAuditors;

reviewingtheCompany’smanagementand

statutoryreporting(includingthequarterlyandfull

yearaccounts);

reviewingandapprovingoffinanceandaccounting

policiesandtheongoingmonitoringoftheir

implementationandeffectiveness;

ongoingfinancialmonitoringoftheCompany’s

variousdisclosureobligations;and

thereviewandpre-approvalofanynon-audit

servicesprovidedbytheInternalorExternal

Auditorstoensuretheirindependenceis

maintainedatalltimes.



2.7.2remunerationcommittee

Asat31March2009,theCommitteecomprisedtwo

IndependentNon-ExecutiveDirectors.Thecurrent

CommitteeMembersareDeshamanyaLalithDe

Mel,ChairmanoftheCommitteeandalsoChairman

oftheCompanyandMr.MaithriWickremesinghe.

TheCommitteemetfivetimesandattendanceat

meetingsbyitsmembersiscontainedinthetable

below:

Member No.ofMeetingsAttended

DeshamanyaL.DeMel 5

Mr.M.E.Wickremesinghe 5

Mr.H.N.Esufally(CEO)* 5

*Attendsbyinvitationandisnotamemberofthecommittee.

TheCommittee’sresponsibilitiesincludemaking

recommendationstotheBoardon:

CEOandSeniorManagementremuneration

frameworkandlevels;

SeniorManagementperformanceandequity-

basedremunerationplansincludingperformance

incentivesandhurdlesand;

ExecutiveDirectorremuneration.

2.7.3executivecommittees

TheCEO,whohasbeendevolvedwiththeprimary

responsibilityofprovidingoversightoftheCompany

andGroupaffairs,functionsthroughaBoardof

Management(BOM)whichincludestheExecutive

DirectorsoftheCompanyandafewselectedBusiness/

FunctionalHeads.TheRoleoftheBOMisto-

Developoverallstrategyandannualbusiness

plans

Reviewbusinessplansagainstbudgets

Designandreviewgrouppoliciesandcontrols

ProvideaplatformtotheCEOtoraiseideasand

issuesandobtaininput

TheGroupOperatingCommittee(GOC)comprising

theCEO,andselectedSeniorBusiness/Functional

Heads,actsasacommonplatformforsharing

informationbetweenthebusiness/FunctionalHeads.

TheGOCisresponsiblefor-

updatingmembersonGroupperformance,new

initiativesandcorrectiveactions

implementingdecisionsbytheBoard

generatingideas/proposalstotheBoard

providingaforumforlearning

2.8NOmiNatiONstOtheBOard

IntheabsenceofaNominationsCommittee,newappointmentsareconsideredbytheBoardasawhole.FormallettersofappointmentareissuedtothosejoiningtheBoard.AllnewDirectorsundergoaninductionprogrammewhichincludesbeingprovidedwithaDirector’sHandbook,latestAnnualReportandmeetingswithSeniorManagementincludingtheCEOandhisdirectreports.

2.9perfOrmaNceevaluatiONOftheBOard

TheBoardperformanceevaluationprocessinvolvestheNon-ExecutiveDirectorscollectivelyundertakingareviewatleastonceeveryyearoftheperformanceoftheBoardanditsCommittees.

Boardperformanceasawholeisreviewedbyreferencetothecorecompetencycriteriasetoutintheevaluationprocess,whileCommitteeperformanceisreviewedinthecontextoftheobjectivesandresponsibilitiessetoutintherelevantcharterofeachCommittee.

3.prOmOteethicalaNdrespONsiBledecisiON-makiNG

3.1cOdeOfcONduct

TheBoardhasadoptedaCodeofBusinessConductandEthicswhichappliestoDirectors.TheBoardandSeniorManagementoftheCompanyarecommittedtotheCodeandtheprinciplescontainedwithinit

TheCodeprovidesanethicalandbehaviouralframeworkforthewaybusinessisconductedandcontainsasetofgeneralbusinessethicsincluding(butnotlimitedto)actinghonestlyandfairlyinalldealingsandto:

conductbusinesswithstrictprofessionalcourtesyandintegrity;

abideandcomplywithallapplicablelawsandregulations;

reportsuspectedcorruptorunethicalconduct;



ensurethatCompanyresourcesandpropertyareusedproperlyandefficiently;and

notdiscloseinformationordocumentsrelatingtotheCompanyoritsbusinessesotherthanasrequiredbylawandnottomakeanypubliccommentonCompanymattersunlessauthorisedtodoso.

AsetofGuidelinesforethicalbusinessbehaviour

hasalsobeenadoptedforallemployees.TheCodeisregularlycommunicatedanddistributedtoemployees.Newemployeesareissuedwithanemployeehandbookwhichcontainsamongstotherthings,theCodeandtheyarerequiredtocertify(priortocommencingtheiremployment)thattheyhavereadandunderstoodtherequirementscontainedinit.

TheCodeisaimedatensuringthattheCompanymaintainsthehigheststandardsofhonesty,integrityandfairtradingwithshareholders,customers,suppliers,employees,regulatorsandthecommunity.

TheCompanyhasproceduresinplacetomonitoroverallcompliancewiththeCode.ItismadeclearintheCodethatanybreachesaretreatedseriouslyandcouldleadtodisciplinaryactionincludingterminationofemployment.

3.2securitiestradiNGpOlicy

TheCompany’spolicyprohibitsanyDirectororemployeedealinginthesecuritiesoftheCompanyiftheyareinpossessionofanyprice-sensitiveinformation.Subjecttothis,DirectorsandSeniorExecutivesshallrefrainfromtradingeveniftheinformationhasbeenreleasedtotheStockExchangeforaperiodofatleast2marketdays;

aftertheannouncementofthequarterlyandfullyearresults;

beforetheissueofanyprospectusbytheCompany.

4.safeGuardiNteGrityiNfiNaNcialrepOrtiNG

4.1selectiONOfauditOr

TheAuditCommitteeisresponsibleforoverseeingtheexternalauditorselectionprocess.ThisprocessincludesassessingeachofthesubmissionsreceivedandmakingaformalrecommendationtotheBoardontheappointmentoftheExternalAuditor.

Aspartofthatselectionprocess,theAuditCommitteeassesseseachofthesubmissionsreceivedonthefollowingcriteria:

independence; overallauditapproachandmethodology; relevantindustryexperience; experienceandqualificationsofkeyauditstaff

andcost.

Everyyear,theAuditCommitteeassessesthe

ExternalAuditor’sperformanceandrecommends

totheBoardtheappointmentoftheCompany’s

ExternalAuditorsfortheensuingyear.

Duringtheyearunderreview,MessrsErnst&Young

heldofficeastheCompany’sExternalAuditor,

whilstSomeswaran,Jayawickreme,Manoharan

&SangakkaraAssociates(SJMS)servedasthe

Company’sInternalAuditor.

4.2auditOriNdepeNdeNce

TheCompanyhasadoptedapolicyonaudit

independence.Anynon-auditserviceswhichare

tobeprovidedbytheInternalorExternalAuditors

needtobepre-approvedbytheChairoftheAudit

Committee.

Thefollowingservicesarenotprovidedbythe

ExternalAuditor:

preparationofsourcedocuments,bookkeeping

orotherservicesrelatedtopreparingaccounting

recordsorfinancialstatements;

financialinformationsystemsdesignand

implementationservices;

appraisalorvaluationservicesforfinancial

purposes;

fairnessopinions;

contributioninkindreports;

actuarialservices;

internalauditoutsourcing;

managementfunctions(includinganydecision-

making,supervisoryorongoingmonitoring

functionandauthorising,executingor

consummatingtransactions,orexerciseauthority,

onbehalfofmanagement);

humanresourcesandrecruitmentfunctions;



designandimplementationoffinancial

informationtechnologysystemsthatareusedto

generatefinancialinformation;

brokerordealer,investmentadviser,or

investmentbankingservices;

legalservicesandotherexpertadvocacy

services;

anyservicethatinvolvesacontingentfee;and

anyservicethatinvolvestakingcustodyofthe

Company’sassets.

5.maketimelyaNdBalaNceddisclOsure

TheCompanyhasinplacethefollowingprocedures

inordertocomplywithitscontinuousdisclosure

responsibilities:

toimmediatelyadvisetheColomboStock

Exchange(CSE)ofanyinformationwhicha

reasonablepersonwouldexpecttohavea

materialeffectonthepriceoftheCompany’s

securities;

subjecttotheexceptionssetoutintheListing

Rules,theCEOandCFOoftheCompanyconfer

regularlytodetermineifanyannouncement

shouldbemadeundertheCSEListingRules;

theChair,CEO,theCompanySecretaryandthe

ManagerCorporateRelations/CSRaretheonly

personsauthorisedtotalktothemedia,analysts

orshareholders;

anyemployeewhocomesintopossessionof

informationwhichislikelytoaffecttheprice

oftheCompany’ssecuritiesmustimmediately

informtheCompany;

theCompanySecretary,inconsultationwith

theCEOandCFO,willdeterminewhetheran

announcementisrequired;

whereappropriate,toconsiderwhethermatters

underdiscussionwouldtriggercontinuous

disclosureobligationsatmeetingsoftheBoard,

AuditCommitteeandtheBoardofManagement;

and

anestablishedprotocolandapprovalprocedure

forallintendedannouncements.

6.respecttheriGhtsOfsharehOlders

Oneofthemostsignificantresponsibilitiesofthe

Boardistohaveregardtothelong-term

sustainabilityofreturnstoshareholderstakinginto

accounttheinterestsofotherstakeholders.

TheCompanypromoteseffectivecommunication

withshareholdersandencourageseffective

participationatgeneralmeetingstoensurea

highlevelofaccountabilityanddiscussionofthe

Company’sstrategy,goalsandperformance.The

Companymaintainsawebsite(www.hemas.com)

whichisregularlyupdatedwithallrecentannual

reportsandmediareleases.

TheCompany’smostrecentinterimresultsstatementsarearchivedandcanbeaccessedthroughtheinvestor-relationslinkontheCompany’swebsite.

Inallcommunicationswithstakeholders,theBoardaimstopresentrelevantandtimelyinformationthatprovidesabalancedandunderstandableassessmentofthepositionofHemasHoldingsPLCanditsgroupcompanies.Thisisdonethroughadheringtoprinciplesofopennessandsubstanceoverformandstrivingtoaddressmaterialmattersofsignificantinterestandconcerntoallstakeholders.

Communicationwithinstitutionalshareownersandinvestmentanalystsismaintainedthroughperiodicpresentationsoffinancialresultsandpressannouncementsofinterimandfinalresults,aswellastheproactivedisseminationofanymessagesconsideredrelevanttoinvestors.

7.recOGNiseaNdmaNaGerisk

TheBoardrecognisestheimportanceofasound

frameworkofriskoversight,riskmanagementand

internalcontroltogoodcorporategovernanceandhas

putinplaceaformalongoingprocessforidentifying,

assessing,monitoringandmanagingthematerial

businessrisksfaced,orpotentiallyexposedtobythe

Companyinpursuingitsobjectives.Theadequacy

andeffectivenessofthisprocesshasbeencontinually

reviewedbytheBoardandisinaccordancewiththe

StandardRiskFrameworksetinplace.



ElementsoftheCompany’sriskmanagementsystem

include:

aformalriskmanagementpolicywhichhaswell-

definedrolesandaccountabilitiesoftheBoard,

AuditCommitteeandinternalauditfunction

thetrainingofkeyexecutivesandmanagers

intheareaofriskandtherequirementsofthe

Company’sriskmanagementpolicy

formalriskidentificationworkshopsandmeetings

acrossthebusinesstoidentifyandratematerial

businessrisks.Theserisksincludebutarenot

limitedtooperational,compliance,strategic,

reputationorbrand,technological,product

orservicequality,humanresources,financial

reportingandmarket-relatedrisks

theratingofrisksforthelikelihoodofoccurrence,

possibleconsequenceandthelevelofcurrent

controlsandstrategieswhichexisttomanage

therisk

formalriskmanagementupdatesonthe

Company’smanagementofitsmaterialbusiness

risksincludingchangestotheCompany’srisk

profile,providedtotheBoardonaregularbasis

aRiskManagement&AuditTeamwhichis

responsibleforassistingmanagementin

implementingtheBoard’sRiskManagement

Policies

theestablishmentofaninternalauditfunction

whichisindependentoftheExternalAuditorand

hasdirectaccesstotheAuditCommittee

theinternalauditfunctionwhichprovides

assurancetotheBoardbycarryingoutanalysis

andindependentappraisaloftheadequacyand

effectivenessoftheCompany’sriskmanagement

andinternalcontrolsystem

thedevelopmentofariskbasedinternalauditplan

anorganisationstructurewithwell-defined

scopesofresponsibility,clearlinesof

accountabilityandappropriatelevelsofdelegated

authorityandapprovallimits

detailedfinancialpoliciesandproceduresin

theareasofexpenditureauthorisations,credit,

treasuryandrequiredinternalcontrols

annualbudgetingandmonthlyreportingsystems

foralloperatingunits

acomprehensiveinsuranceprogramme.

8.remuNeratefairlyaNdrespONsiBly

8.1remuNeratiONcOmmittee

TherolesandresponsibilitiesoftheCommitteeare

providedintheCommittee’sReportonpage42.

8.2remuNeratiONOfdirectOrsaNdseNiOrexecutives

Detailsoftheamountsofremunerationof

Non-ExecutiveDirectorsandExecutiveDirectors

aresetoutintheRemunerationReportonpage42,

whichalsoincludesdisclosuresonequity-based

remunerationprovidedbytheCompany.




InpreparingthisReport,theRemuneration

Committee(theCommittee)hasgivendue

considerationtotherulesrelatingtoremuneration

committeessetoutintheListingRulesofthe

ColomboStockExchangeandtheCodeofBest

PracticeonCorporateGovernanceissuedjointly

bytheInstituteofCharteredAccountantsandthe

SecuritiesandExchangeCommissionofSriLanka.

TheCommitteeisdedicatedtotheprinciplesof

accountabilityandtransparencyandtoensuringthat

remunerationarrangementsdemonstrateaclearlink

betweenrewardandperformance.Operatingunder

delegatedauthorityfromtheboard,itsactivities

aregovernedbytermsofreferencewhichcomply

withtheCodeonCorporateGovernance,andare

summarisedbelow:

• Reviewandapproveoverallremuneration

philosophy,strategy,policies,andpractices

(includingperformance-basedpayplans).

• Setandreview,inaccordancewithremuneration

policiesandpractices,allcomponentsofthe

remunerationoftheChiefExecutiveOfficer,

ExecutiveDirectorsandsuchotherSenior

Executivesastheboardmayfromtimetotime

determine.

• Reviewandapprove,asappropriate,the

performanceevaluation/appraisalsystem,

methodologyandprocessforthepersonnel

referredtoabove.

• Reviewandapprove,asappropriate,thetermsof

employmentcontractsforthepersonnelreferred

toabove.

• ReviewandapprovethetermsoftheCompany’s

short-termandlong-termincentiveplans

includinganyshareoroptionschemesfor

employeesand/ordirectors.

• ReviewandapprovethetermsoftheCompany’s

superannuationand/orpensionschemes.

• Considersuchothermattersrelatingto

remunerationissuesasmaybereferredtoitby

theBoard.

Inperformingthisrole,theCommitteeistoprovide

oversightoftheGroup’sremunerationphilosophyand

broadpoliciesonbehalfoftheBoardtoensurethat:

• Shareholderandemployeeinterestsarealigned

• TheGroupisabletoattractandretainsuperior

managementtalent

• TheintegrityoftheGroup’srewardprogrammeis

maintained.

TheCommitteeismadeupoftheindependent

non-executiveDirectorsidentifiedonpages46and

47.TheCommitteeischairedbyDeshamanya

LalithDeMel,ChairmanoftheBoard.TheCEO

attendsmeetingsbyinvitation.

Detailsofattendanceatmeetingsaresetoutinthe

CorporateGovernanceReport.

TheCompanySecretaryactsasSecretarytothe

RemunerationCommittee.

remuNeratiONtOdirectOrs

DetailsofemolumentsreceivedbytheBoardof

DirectorsaregiveninNote37.2tothefinancial

statements.

shareOWNershipscheme

Duringtheyearunderreview,theCommittee

consideredtheissueofasuitablelong-termincentive

beinginplaceforseniorstaffincludingExecutive

Directors.Accordingly,anannualplanwasputin

placewhichpaysoutoverthreeyears.Detailsof

theSchemearegiveninNote2.6tothefinancial

statements.

lalithdemel maithriWickremesinghe

Chairman

RemunerationCommittee

26May2009

rEPOrT OF THE rEMUnEraTiOn COMMiTTEE


TheAuditCommitteeofyourCompanyisaCommitteeoftheBoardofDirectorsappointedbytheBoardandconsistsoftwodirectorswhoqualifyasIndependentNon-ExecutiveDirectorsunderthestandardsprescribedbytheColomboStockExchange.

TheAuditCommitteea. hasoversightresponsibilitiesrelatingto,the

qualityandintegrityoftheCompany’sfinancialstatementsandfinancialreportingprocessincludingthepreparation,presentationandadequacyofdisclosuresinthefinancialstatementsoftheCompanyinaccordancewiththeSriLankaAccountingStandards;

b. hasoversightresponsibilitiesrelatingtotheCompany’scompliancewithfinancialreportingandinformationrequirementsoftheCompaniesActNo.07of2007andotherrelevantfinancialreportingrelatedregulations;

c. hasoversightresponsibilitiesoverprocessestoensurethattheCompany’sinternalcontrolsandriskmanagementareadequatetomeettherequirementsoftheSriLankaAuditingStandards;andcompliancebytheCompanywithlegalandstatutoryrequirements;

d. assessestheindependenceandperformanceoftheCompany’sexternalauditors;

e. makesrecommendationstotheBoardpertainingtoappointment,re-appointmentandinappropriatecircumstancesremovaloftheexternalauditors;and

f. approvestheremunerationandtermsofengagementoftheexternalauditors.

TheinternalauditorsreporttotheAuditCommitteewhichmeetswiththeinternalauditorsbothwithandwithoutthemanagementpresent.

TheAuditCommitteemetfivetimesduringthefinancialyear2008/09.TheChiefExecutiveOfficerandtheChiefFinancialOfficerwerepresentatthemeetingsoninvitation.IncarryingoutitsresponsibilitiestheactivitiesoftheAuditCommitteeinthefinancialyearended31March2009includedthefollowing:

• Reviewingtheinternalauditplanandmonitoringtheperformanceoftheinternalauditorsandadherencetotheinternalauditplan.

• Reviewingtheinternalauditreportsandmonitoringfollowupactionbythemanagement.

• Discussingthebusinessrisksfaced;

• Commissioningthepreparationofastandardrisk

framework.

• Consideringthebusinesscontinuityplanpreparedbyexternalconsultantsandrecommendingimplementation.

• ReviewingtheresultsoftheSAPAuditandmonitoringfollow-upactionbythemanagement.

• Reviewingtheun-auditedquarterlyfinancialstatementsanddiscussionwiththemanagementbeforesubmissiontotheBoardandcirculationtoshareholders.

• Reviewingtheauditedfinancialstatementsfortheyearanddiscussingthosefinancialstatementswiththemanagementandexternalauditors.

• DiscussingwiththemanagementandCompany’sexternalauditorstheresultsoftheexternalauditors’examinationsandthejudgmentoftheexternalauditorsconcerningthequalityaswellastheacceptabilityoftheCompany’saccountingprinciples.

• Discussingthemanagementletterandmonitoringfollowupactionbythemanagement.

• DiscussingwiththeexternalauditorstheirindependencefromtheCompanyandtheCompany’smanagementincludingaconsiderationofthecompatibilityofnon-auditservicesprovidedbytheExternalAuditorswiththeirindependence.

Havingreviewedtheeffectivenessoftheexternalaudit,theAuditCommitteerecommendedtotheBoardthere-appointmentofMessrsErnst&YoungCharteredAccountantsastheexternalauditorsoftheCompanyfortheensuingfinancialyear,subjecttotheapprovaloftheshareholdersattheAnnualGeneralMeeting.

maithriWickremesinghe pradiptamohapatraChairman

AuditCommittee26May2009

aUDiT COMMiTTEE rEPOrT



RelatedpartydisclosuresasrequiredbytheSriLankaAccountingStandardsNo.30onRelatedPartyDisclosures

isdetailedinNote37tothefinancialstatements.Inaddition,theCompanycarriedouttransactionsintheordinary

courseofbusinesswithentitieswheretheDirectorsoftheCompanyareDirectorsofsuchentities.

value ValueCompany Directors Natureof 2009 2008 Transaction rs. Rs.

HemasInternational Mr.H.Esufally ManagementFees – 781,250Freight(Pvt)Ltd. Mr.I.Esufally BankGuaranteeCharges – 22,500 ConsultancyFees 12,428,571 863,590 ITCharges 2,389,603 3,441,308 InterestIncome 3,743,722 1,836,738 DividendIncome 1,082,503 1,122,194

HemasTravels(Pvt)Ltd. Mr.H.Esufally AirlineTicketSales 6,135,069 4,361,914 Mr.I.Esufally BankGuaranteeCharges 70,000 70,000 ManagementFees – 888,452 ConsultancyFees 10,700,000 12,017,609 ITCharges 4,987,973 6,117,384 InterestIncome 23,973 114,761 DividendIncome 5,753,640 7,851,179

HemasMarketing(Pvt)Ltd. Mr.H.Esufally ConsultancyFees – 16,874,379 ITCharges – 4,247,684 InterestIncome – 2,243,601 ManagementFees – 2,866,199 DividendIncome 39,727,870 70,644,010

HemasManufacturing Mr.H.Esufally RentalIncome 883,514 4,723,557(Pvt)Ltd. ConsultancyFees 55,000,000 27,586,664 ITCharges 25,897,860 17,376,225 ManagementFees – 2,866,199 InterestIncome – 321,458 InterestExpense (64,520,189) – DividendIncome 21,541,815 22,331,670

HemasAirServices(Pvt)Ltd. Mr.H.Esufally ManagementFees – 971,812 Mr.I.Esufally ConsultancyFees 12,400,000 13,596,670 InterestExpense 7,353,191 (4,505,449) ITCharges 1,690,881 1,689,209 DividendIncome 3,139,260 4,273,914

HemasPharmaceuticals Mr.H.Esufally ConsultancyFees 75,250,000 41,517,287(Pvt)Ltd. Mr.M.Esufally ITCharges 17,494,625 16,900,429 InterestIncome 3,223,455 4,983,191 InterestExpense 75,394 – ManagementFees – 1,734,544 BankGuaranteeCharges 443,750 443,750 DividendIncome 25,980,079 28,426,207

Hemtours(Pvt)Ltd. Mr.H.Esufally ITCharges 2,088,229 5,844,731 Mr.A.Esufally InterestIncome 4,778,041 1,944,308 DividendIncome 3,313,637 2,365,308

ForbesAirServices(Pvt)Ltd. Mr.H.Esufally ManagementFees – 1,185,541 Mr.A.Esufally ConsultancyFees 64,808,000 22,768,943 Mr.I.Esufally BankGuaranteeCharges – 11,250 Mr.M.Esufally ITCharges 248,646 549,548 DividendIncome 5,087,765 6,708,777 InterestExpense 7,738,971 –

DirECTOrS’ inTErEST in COnTraCTS WiTH THE COMPanY


value ValueCompany Directors Natureof 2009 2008 Transaction rs. Rs.

HemasDevelopments(Pvt)Ltd. Mr.A.Esufally ManagementFees – 1,206,003 ConsultancyFees 3,000,000 1,483,425 InterestExpense (10,700,895) (4,325,220) ITCharges 52,363 42,241 DividendIncome 8,836,363 6,307,489

VishwaBPO(Pvt)Ltd. Mr.H.Esufally SharedServicesExpenses (6,401,867) (3,228,444) InterestExpense (1,168,124) –

HemasPower(Pvt)Ltd. Mr.H.Esufally BankGuaranteeCharges 3,125 46,875 ITCharges 257,250 184,688 InterestIncome 7,730,361 9,406,874 DividendIncome 1,948,508 2,019,950

PeaceHavenResortsLtd. Mr.H.Esufally InterestExpense (34,471,122) (29,216,237) Mr.A.Esufally DividendIncome 6,306,109 2,905,950 ConsultancyFees 5,000,000 – HemasCorporateServices Mr.H.Esufally CentralisedCorporateServices (5,730,459) (4,855,106)(Pvt)Ltd. BankGuaranteeCharges 25,000 25,000 ITCharges 2,483,187 1,834,761 InterestIncome 5,867,655 859,244 DividendIncome – 1,172,237

HemasHospitals(Pvt)Ltd. Mr.M.Esufally BankGuaranteeCharges – 156,250 ConsultancyFees – 1,250,000 ITCharges 1,834,063 61,024 InterestIncome 797,801 442,508 InterestExpense (905,337) (1,314,001) RentalIncome 478,393 –

HemasSouthernHospitals Mr.M.Esufally BankGuaranteeCharges 550,000 137,500(Pvt)Ltd. ITCharges 531,639 – InterestIncome – 1,742,345 InterestExpense – (732,693)

GiddawaHydroPower(Pvt)Ltd. Mr.H.Esufally BankGuaranteeCharges 330,000 660,000 InterestIncome 1,731,400 –

ACXInternational(Pvt)Ltd. Mr.H.Esufally ITCharges 1,390,992 178,720 Mr.I.Esufally InterestIncome 209,593 97,623 DividendIncome 706,737 –

HellmanWorldwideLogistics Mr.I.Esufally InterestIncome 485,290 426,900(Pvt)Ltd.

DiethelmTravelsLanka(Pvt)Ltd.Mr.A.Esufally ITCharges 2,456,290 – InterestIncome 115,069 –

N-Able(Pvt)Ltd. Mr.I.Esufally InterestIncome 721,792 –

ClinicalResearchServices Mr.H.Esufally InterestIncome 398,381 – (Pvt)Ltd.

HemasAviation(Pvt)Ltd. Mr.I.Esufally ITCharges 787,025 –

FarShippingLanka(Pvt)Ltd. Mr.I.Esufally ConsultancyFees 21,431,088 – ITCharges 249,340 –

DirECTOrS’ inTErEST in COnTraCTS WiTH THE COMPanY

BOarD OF DirECTOrS

1.HuseinEsufally-ChiefExecutiveOfficer

Mr.H.N.EsufallyholdsaBachelorof

Science(Honours)DegreeinElectronics

fromtheUniversityofSussex,U.K.Hewas

appointedastheChiefExecutiveOfficerin

2001andhasmanagementexperienceof

over28years.HeisaTrusteeattheNational

CouncilforMentalHealth(Sahanaya).Heis

alsothefoundermemberoftheAssociation

forRehabilitationofSpinalCordInjuries

(ARSCI).

2.AbbasEsufally

Mr.A.N.EsufallyisaFellowofboththe

InstituteofCharteredAccountantsof

EnglandandWalesandtheInstituteof

CharteredAccountantsofSriLankaandis

anAll-IslandJusticeofthePeace.Heserves

asChairmanofSerendibHotelsPLCand

StaffordHotelsPLC.Hehasexperienceof

over30yearsinSriLankaandoverseas

andhasbeenintheforefrontoftheleisure

industryinSriLanka.HeistheHonorary

ConsulGeneralofBhutaninSriLanka.

3.ImtiazEsufally

Mr.I.A.H.EsufallyholdsaBachelorof

Arts(Honours)DegreeinAccountingand

EconomicsfromtheUniversityofKent,UK.

HeheadstheTransportationSectorwillover

20years’managementexperienceinthis

fieldandhasbeenintheforefrontofthe

aviationIndustryinSriLanka.Hewasalso

PastPresidentoftheIATAAgentsAssociation

ofSriLanka.

4.MurtazaEsufally

Mr.M.A.H.EsufallyholdsaBachelorofLaw

DegreefromtheUniversityofEssex,UK.He

isaBarrister-at-Law(Lincoln’sInn)andisan

Attorney-at-LawoftheSupremeCourtof

SriLanka.HehasanExecutiveMBA

fromtheMelbourneBusinessSchool.He

hasover17yearsofseniormanagement

experience.HeisalsotheChairmanof

HemasHospitals(Pvt)Ltd.

ExEcutivE dirEctors

ImtiazEsufally MaithriWickremesinghe PradiptaMohapatra HuseinEsufally

5.DeshamanyaLalithDeMel-Chairman

DeshamanyaJ.C.LDeMelhasaMaster

ofArtsDegreefromCambridgeUniversity,

UK,andtheAMPHarvardBusinessSchool,

USA.Hecountsover40years’Board

experiencehavingservedasaDirectorof

severalcompaniesinSriLankaandabroad.

HehasservedmostofhiscareeratReckitt

BenckiserPLC,UKandwasamainBoard

Director.HewastheGlobalDirector-

Pharmaceuticalswhenheretiredin1999.He

hasservedastheChairmanoftheBoardof

Investment,SriLankaandastheChairman

ofSriLankaTelecomLimited,andwasa

SeniorAdvisor,MinistryofFinance.Heholds

Directorshipsinmanyothercompaniesand

isaTrusteeoftheCambodiaTrust,UK.

6.MaithriWickremesinghe

Mr.M.E.WickremesingheisanHonours

GraduateinLawoftheUniversityof

Colombo,anAttorney-at-Lawofthe

SupremeCourtofSriLankaandaFellow

oftheCharteredInstituteofManagement

AccountantsoftheUnitedKingdom.Heis

apractisingAttorney-at-Lawspecialisingin

Commercial&BankingLaw.Heservesonthe

BoardofDirectorsofNationsTrustBankPLC

asanIndependentNon-ExecutiveDirector

andistheChairmanofitsNominations

Committee.Hehaslecturedandexamined

attheFacultyofLawoftheUniversityof

Colombo,attheUniversityofMoratuwaand

attheKotalawelaDefenceAcademy.

7.PradiptaMohapatra

Mr.P.K.Mohapatraisadirectoronthe

mainboardofRPGEnterprises,aUSD

2.5BnbusinesshouseinIndia.Healso

sitsontheboardsofanumberofRPG

groupcompaniesinIndia,USA,Europe

andtheAsiaPacific.Duringhiscareer

atRPG,hiskeyassignmentsincluded

BusinessIncubation,BusinessTurnaround,

MergersandAcquisitionsandCEO

Mentoring.Mr.MohapatraisaChemical

EngineeringGraduatefromNIT,Roukela,

studiedBusinessatMumbaiandHarvard

BusinessSchool,Boston.Hewasalso

invitedtobeaFellowoftheChartered

ManagementInstitute,UK.Heisan

accreditedinternationalCEOCoachfrom

theBehavioralCoachingInstitute,UK.

8.DivyaroopBhatnagar

Mr.D.BhatnagarisaGraduatein

MechanicalEngineeringfromtheIndian

InstituteofTechnology,Kanpur,Indiawitha

MBAinMarketingfromtheIndianInstitute

ofManagement,Calcutta,India.Hehasover

25yearsofexperiencewithmultinational

companiessuchasUnilever,Benckiser,

PhillipsandICI.

non-ExEcutivE dirEctors

LalithDeMel AbbasEsufally MurtazaEsufally DivyaroopBhatnagar

TheSeniorManagementoftheHemasGroupconsistsoftheExecutiveDirectorsofHemasHoldingsPLC,the

BoardofManagementandtheGroupOperatingCommittee.

TheBoardofdirectorsofHemasHoldingsPLCprovidesleadershipfortheaffairsoftheCompanywithina

frameworkofprudentandeffectiveriskmanagement.Itsetsthestrategicaims,ensuringthatthenecessary

financialandhumanresourcesareinplacefortheCompanytomeetitsobjectives.TheBoardreviews

managementperformance,setstheCompany’svaluesandstandardsandmakessurethattheobligationstoits

shareholdersareunderstoodandmet.

TheroleoftheBoardofmanagementistodevelopoverallGroupstrategyandannualbusinessplans,review

businessplans,evaluateinvestmentproposals,designandreviewGrouppoliciesandcontrolsandprovidea

forumfortheChiefExecutiveOfficertodiscussideasandissues.

TheGroupOperatingcommitteeprovidesaforumforseniormanagementtoappraiseGroupperformance,

sharebusinessinformationandbestpractices,andimplementdecisionsdelegatedbytheBoard.Fromtimeto

timelearninginterventionsbyhigh-levelresourcepersonnelareprovidedtothisGroup.

SEniOr ManaGEMEnT

Board of ManagEMEnt

01 02 03

1. malingaarsakularatne-ChiefFinancialOfficer

2. kishanNanayakkara-ManagingDirector,HemasPower

3. isurutillakawardane-Director,GroupHumanResources

AllExecutiveDirectorsarealsomembersoftheBoardofManagement.


group opErating coMMittEE

01

04 05

07

08 09 10

06

1. srilalmiththapala-CEO,SerendibLeisure

2. harithperera-ManagingDirector,DiethelmTravels

3. sanjeewasamaranayake-ManagingDirector,Pharmaceuticals

4. royJoseph-CommercialDirector,FMCG

5. kasturichellarajaWilson-ChiefProcessOfficer

6. imalfonseka-ManagingDirector,FMCG

7. riadameen-LegalConsultant

8. dr.irshadmusheen-Director,Maritime

9. deshiniabeyewardena-Director,BusinessDevelopment

10. surenraymond-Director,InternationalBusinessFMCG

0302


TheDirectorshavepleasureinpresentingtothe

memberstheirSixthAnnualReporttogetherwiththe

AuditedStatementofAccountsoftheCompanyfor

theyearended31March2009.

TheseStatementsofAccountswereapprovedbythe

BoardofDirectorson26May2009.

GOiNGcONcerN

TheDirectorshaveadoptedthegoingconcernbasis

inpreparingthesefinancialstatements.

directOrs’respONsiBilityfOrfiNaNcialrepOrtiNG

TheDirectors’Responsibilityinrelationtothe

financialstatementsisdetailedonpage58.

reGistratiONdetails

HemasHoldingsPLCwasincorporatedon

10December1948intermsoftheCompanies

OrdinanceNo.51of1938andlistedontheColombo

StockExchangeon15October2003.

TheCompanywasre-registeredasperthe

CompaniesActNo.07of2007on30May2007.

NatureOfBusiNess

TheCompanyisaninvestmentholdingand

managementcompany.

priNcipalactivities

TheprincipalactivitiesoftheGroupinclude

manufacturingandmarketingoffastmoving

consumergoods,theprovisionofhospitalservices,

thepharmaceuticaldiagnosticandsurgical

distributionbusiness,toursandtravel-related

services,freightforwarding,courierandmaritime,

generationandsupplyofthermalandhydropower,

leisureandhospitalityandpropertydevelopment.

Therehavebeennosignificantchangesinthenature

oftheactivitiesoftheGrouporoftheCompany

duringthefinancialyear.

annUaL rEPOrT OF THE DirECTOrS On THE aFFairS OF THE COMPanY

revieWOftheyear

TheManagementReportsetsoutanexpanded

explanationofthevariousbusinesses;thestateof

affairsandperformanceoftheCompanyandthe

Groupduringtheyearandincorporatesevents

subsequenttothedateoftheBalanceSheet.

acquisitiONsaNddivestmeNts

YourCompanyacquireda17%stakeinMercantile

ShippingPLCinNovember2008withaviewto

investfurtherinthemaritimesector.

Hemasdivested51%ofitsinvestmentinHemas

InternationalFreight(Pvt)Ltd.andenteredintoajoint

venturewithHellmannWorldwideLogistics(Pvt)Ltd.

NeWiNitiativeshealthcare

HemasHospitals(Pvt)Ltd.andHemasSouthern

Hospitals(Pvt),thefirsttwohospitalssetup

underamodeldevelopedtodeliveraffordable

communityhealthcare,werecommissionedin

December2008andMarch2009,respectively.

power

Thefirst2MWminihydroprojectinGiddawa,Kandy,

wascommissionedinOctober2008.TheGroupalso

commencedpreparatoryworkonasecondmini

hydrointheKegalleDistrictduringtheyear.

leisure

Hemtours(Pvt)Ltd.,enteredintoastrategicequity

partnershipwithDiethelmTravel(Thailand)Ltd.

AnewentitybythenameofDiethelmTravel

SriLanka(DTSL)wasthereafterestablishedtohandle

touroperationsinSriLankaandtheMaldives.

transportation

IslandAviationofMaldives,resumedflights

toColombounderthebrandname“Maldivian

Airlines”inNovember2008,withHemasAviation

(Pvt)Ltd.asitsGeneralSalesAgent.

HemasAviation(Pvt)Ltd.alsoenteredintoa

GroundHandlingAgreementwithRossiyaAirlines,

forthedurationofthewinterfromNovember2008

toMarch2009.


itservices

AnITenablementprojectwasestablishedtoprovide

servicesintheareasofdesigning,implementingand

supportingnextgenerationnetworks.

futuredevelOpmeNts

ItremainsyourBoard’sintentiontodevelopthe

Groupthroughorganicgrowthandbyselective

acquisitions.

summaryOffiNaNcialiNfOrmatiON

Asummaryofthepublishedresultsandoftheassets

andminorityinterestsoftheGroupforthelastfive

financialyearsasextractedfromtheauditedfinancial

statementsandreclassifiedasappropriateissetout

below:

results

Yearended31March 2009 2008 2007 2006 2005 (Restated) (Restated) rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

GroupRevenue 15,342,278 14,163,805 11,778,136 9,779,338 9,275,784

NetProfitfromOrdinaryActivities

AttributabletoHemasGroup 775,128 1,135,419 1,005,727 958,599 836,973

assets,liaBilitiesaNdmiNOrityiNterests

31March 2009 2008 2007 2006 2005 (Restated) (Restated) rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

TotalAssets 14,835,812 13,130,626 11,395,855 10,024,762 9,651,969

TotalLiabilities (6,970,460) (6,091,961) (5,533,189) (5,208,708) (5,328,099)

MinorityInterests (837,062) (604,966) (588,527) (496,967) (681,897)

ShareholdersFunds 7,028,290 6,433,699 5,274,144 4,319,087 3,641,973

divideNds

Fortheyearended31March2009,theDirectors

haverecommendedthepaymentofafirst&final

dividendofRs.1.80pershareamountingto

Rs.183,524,623/-onOrdinaryShares.

AsrequiredbySections56(2)and56(3)ofthe

CompaniesActNo.07of2007,theBoardof

Directorssignedacertificatestatingthatintheir

opiniontheCompany,basedontheinformation

availableasatpresent,satisfiesthesolvencytest

immediatelyafterthedistribution,inaccordancewith

Section57oftheCompaniesActNo.07of2007,and

haveobtainedacertificatefromtheAuditors,priorto

recommendingthefinaldividendforapprovalofthe

shareholdersattheAnnualGeneralMeetingtobe

heldon26June2009.



siGNificaNtaccOuNtiNGpOlicies

TheSignificantAccountingPoliciesadoptedinthe

financialstatementsisgivenonpages65to74ofthe

AnnualReport.

directOrs

TheDirectorsinofficeatthedateofthisreport,their

biographicaldetailsandthecommitteesonwhich

theysitaredetailedintheBoardofDirectorssection

ofthisReport.

Mr.AbbasEsufallyceasedtobeanExecutive

Directorwitheffectfrom31March2009,but

continuestoserveontheBoardasaNon-Executive

Director.

retiremeNtByrOtatiONaNdre-electiON

PursuanttoArticles84and85oftheArticles

ofAssociationoftheCompany,andsubjectto

shareholderapproval,Mr.P.K.Mohapatraand

Mr.H.N.Esufallyretirebyrotationattheforthcoming

AnnualGeneralMeetingand,beingeligible,offer

themselvesforreappointment,withtheunanimous

supportoftheBoard.

SpecialNoticehasbeenreceivedbytheCompany

fromMessrsSarazInvestments(Pvt)Ltd.;a

shareholderoftheCompany,informingoftheir

intentiontomoveaResolutionstatingthatSection210

oftheCompaniesActNo.07of2007shallnotapplyto

DeshamanyaJ.C.L.DeMel.

DeshamanyaJ.C.L.DeMeliseligiblethereforefor

re-electionwiththeunanimousconsentoftheBoard

fromtheconclusionoftheforthcomingAnnual

GeneralMeetingtothenextAnnualGeneralMeeting.

iNdepeNdeNceOfdirectOrs

DeshamanyaLalithDeMel,Chairman,Mr.Maithri

WickremesingheandMr.PradiptaMohapatra

functionasIndependentNon-ExecutiveDirectorson

theBoardofHemas.

InaccordancewithRule7.10.2boftherulesand

regulationsoftheColomboStockExchangeon

corporategovernance,eachoftheDirectorshave

declaredtheirindependence,havingmettherelevant

criteria.

directOrs’remuNeratiON

TheaggregateremunerationpaidtotheDirectors

forthefinancialyearended31March2009which

includesdisclosuresonnon-cashbenefitsand

equity-basedremunerationprovidedbytheCompany

aregiveninNote37.2ofthefinancialstatements.

AcertificatewassignedbytheBoardinaccordance

withSection216(4)oftheCompaniesActstating

thatintheiropinionthemakingofthepaymentisfair

totheCompanyandthereasonsforreachingthat

opinion.

eNterpriseGOverNaNce

TheBoardendorsestheCodeofBestPractice

andConductassetoutjointlybytheInstituteof

CharteredAccountantsandtheSecuritiesand

ExchangeCommissionofSriLankaandhassatisfied

itselfthatHemashascompliedwiththeCodeand

theRulesonCorporateGovernanceissuedbythe

ColomboStockExchangeinallmaterialaspects

throughouttheperiod.

relatedpartytraNsactiONs

Relatedpartytransactionshavebeendeclaredat

meetingsoftheDirectorsandaredetailedinNote37

totheaccounts.

iNterestsreGister

TheInterestsRegisterismaintainedbytheCompany

aspertheCompaniesActNo.07of2007.All

Directorshavemadedeclarationsasprovidedforin

Section192(2)ofthesaidAct.Therelatedentries

weremadeintheInterestsRegisterduringtheyear

underreview.TheshareownershipoftheDirectors,

theirinterestincontractsandremunerationpaid

toDirectors,havebeenincludedintheInterests

Register,inaccordancewiththeCompanies’Act.

Thedetailsaregivenonpages109,44and104

respectively.



directOrs’sharehOldiNG

ThedirectandindirectshareholdingsoftheDirectors

asatthefinancialyearendaretabulatedonpage109.

directOrs’aNdOfficers’iNsuraNce

TheCompanymaintainsinsurancecoverforall

DirectorsandOfficersofGroupcompaniesagainst

liabilitieswhichmaybeincurredbythemwhileacting

asDirectorsandOfficers.

Asatthedateofthisreport,indemnitiesareinforce

underwhichtheCompanyhasagreedtoindemnify

theDirectors,totheextentpermittedbylawandthe

Company’sArticlesofAssociation,againstallcosts,

charges,lossesandliabilitiesthattheymayincurin

theexecutionoftheirduties,powers,authoritiesand

discretionsasDirectorsoftheCompany,oranyother

companyofwhich,attherequestoftheCompany,

theyareDirectorsorOfficers.Copiesofthese

indemnitiesarekeptattheCompany’sregistered

officeandareopenforinspectionbyanymember

oftheCompany.However,theseindemnitiesdonot

covertheDirectorsorOfficersforfraudulentactivity.

cOmpaNysecretaries

TheCompanySecretariesareHemasCorporate

Services(Pvt)Ltd.Theirregisteredofficeissituated

atNo.36,BristolStreet,Colombo01.

reGistrars

MessrsSSPCorporateServices(Pvt)Ltd.,ceasedto

betheRegistrarstotheCompanywitheffectfrom

15April2009.HemasCorporateServices(Pvt)Ltd.

wereappointedRegistrarstotheCompanyfromthat

date.

chaNGeiNaccOuNtiNGpOlicies

Theaccountingpoliciesareconsistentwiththose

appliedintheannualfinancialstatementsinthe

previousyear,exceptforthechangedisclosedin

Note2.2tothefinancialstatements.

equitaBletreatmeNttOsharehOlders

TheCompanyhasmadeallendeavourstoensure

equitabletreatmenttoallshareholders.

riskmaNaGemeNt

SpecificactionstakenbytheGroupinthisregard

aregivenundertheRiskManagementsectionofthis

Reportonpage24.

systemsaNdiNterNalcONtrOls

TheCompanyhasaneffectiveandcomprehensive

systemofinternalcontrolscoveringFinancial,

OperationalandComplianceControls.

iNcOmetaxexpeNses

IncomeTaxexpenseshavebeencomputedatthe

ratesgiveninNote8tothefinancialstatements.

capitalexpeNditure

DetailsofProperty,Plant&Equipmentandtheir

movementsduringtheyeararegiveninNote11to

thefinancialstatements.

BOrrOWiNGcapacity

TheCompany’sborrowingsarenotrestrictedin

termsoftheArticlesofAssociationoftheCompany.

marketvalueOffreehOldprOperties

DetailsofrevaluationsarelistedinNote11tothe

financialstatements.

fixedassetsaNdiNvestmeNtprOperties

Detailsofmovementsinfixedassetsandinvestment

propertiesoftheGroupduringtheyeararesetout

inNotes11and12tothefinancialstatements,

respectively.

reserves

Therewereonothermaterialtransferstoorfrom

reservesduringthefinancialyearotherthanas

disclosedinNote24totheaccounts.

statedcapital

Duringtheyearunderreview,theissuedand

subscribedsharecapitaloftheCompanywas

increasedbytheallotmentof650,000ordinaryshares

bywayofanEmployeeShareOwnershipScheme

(ESOS).Consequently,theStatedCapitalofthe

CompanystandsincreasedtoRs.1,369,222,534/-

comprising101,958,124issuedordinaryshares.



emplOyeeshareOptiONplaN

YourCompanyhadwiththeapprovalofits

shareholders,implementedtwoemployeeshare

optionschemesin2003and2006intermsofwhich

atotalof4,468,699ordinarysharesweretobemade

availabletoemployees,ofwhich2,510,699shares

wereallotted.However,inviewofthedepressed

stockmarketconditions,theseschemesfailedto

deliverthedesiredobjectives.

emplOyeeshareOptiONscheme

YourBoard,havingregardtothefactthatmaintaining

aproprietyinterestandalong-termcommitment

amongsttheseniorexecutivesoftheCompanyand

theGrouponacontinuingbasiswouldfacilitatethe

retentionofkeypersonnelandincreaseshareholder

value,decidedtorecommendtheissueofafurther

3,000,000sharesbywayofanEmployeeShare

OwnershipScheme.Thenewschemewasapproved

bythemembersandcameintoeffecton

9December2008.

The1stTrancheof650,000shareswasallocatedto

JaceyTrustServices(Pvt)Ltd.,Trusteeson

6February2009,tobeheldintrustfortheeligible

employeesuntilsuchtimeasthesharesare

transferredtothemintermsoftheESOSTrust-2008.

cOrpOratedONatiONs

Duringtheyear,theGroupmadedonationstocharity

ofapproximatelyRs.409,909/-(2007/08-Rs742,774/-).

shareiNfOrmatiON

Informationrelatingtoearnings,dividends,netassets

pershare,marketvalueofashareandinformation

onsharetradingisstatedunderShareholderand

InvestorInformation.

suBstaNtialsharehOlders

TheCompanyhasbeennotifiedinterestby

shareholdersinsharesrepresenting10%ormoreof

theCompany’sissuedshares,detailsofwhichare

givenonpage110.

Thepercentageofsharesheldbythepublicasat

31March2009was27.69%.

cOmpliaNceWithlaWsaNdreGulatiONs

TheCompanyhasnotengagedinanyactivityagainst

theprevailinglawsandregulations.Complianceswith

provisionsinlawsandregulationsareconfirmedto

theBoardatBoardMeetings.

statutOrypaymeNts

TheDirectorsaresatisfiedthatallStatutory

PaymentstotheGovernmentandotherStatutory

Institutionsincludingemployee-relatedpayments

havebeenmadeintimetothebestoftheir

knowledgeandbelief.

humaNresOurce

TheCompany’sHumanResourceManagement

PoliciesandPracticesaredesignedtodevelopits

employeesandtoensuretheiroptimumcontribution

towardstheachievementofCompanygoals.

InformationrelatingtoHumanResourceand

EmploymentPoliciesisgivenunderSustainability

Reportonpage26.

emplOyeeiNvOlvemeNt

TheCompanyiscommittedtoensuringthat

employeesshareinthesuccessoftheCompany.

Employeesareencouragedtoparticipateinshare

optionandsharepurchaseplans.

TheGroupcontinueditspolicyofinformingand

involvingemployeesinmatterswhichconcern

themthroughtheuseofregularmeetingsbetween

managementandemployees,theintranetand

briefings.

equalOppOrtuNities

TheGroupiscommittedtoprovidingequal

opportunitiestoallemployeesirrespectiveoftheir

gender,sexualorientation,maritalstatus,age,

religion,raceordisability.ItistheGroup’spolicy

togivefullandfairconsiderationtopersonswith

respecttoapplicationsforemployment,continued

employment,training,careerdevelopmentand

promotion,havingregardtoeachindividual’s

particularaptitudesandabilities.



cOrpOratesOcialrespONsiBility

AllactivitiesembarkeduponbytheCompanyinthis

regardaregivenintheSustainabilityReporton

pages26to34.

eNvirONmeNtalprOtectiON

TheCompanyhasnotengagedinanyactivitywhich

isharmfultotheenvironment.Measurestaken

toprotecttheenvironmentaregivenunderthe

SustainabilityReportonpage31.

maNaGemeNtphilOsOphy

Hemasadoptsahands-onapproachtomanaging

itsbusinesses.Eachsectorisself-containedwith

itsownfinancialandadministrationinfrastructure.

TheGroup’sChiefExecutiveOfficer,is,however,

activelyinvolvedineachofthesectorsandmonitors

performanceclosely.Cashflowisofparamount

importanceandthefocusisalwaysonmaximum

cashgeneration.TheBoardaimstoaddvalueby

providingexpertiseandguidancetosubsidiary

managementteamswherefeasible,andbypooling

bestpracticeswithintheGrouptothebenefitofall

subsidiaries

eveNtsafterBalaNcesheetdate

Nomaterialeventshavetakenplaceafterthe

BalanceSheetdatewhichrequireanadjustmentto

oradisclosureinthefinancialstatements,otherthan

asdisclosedinNote34totheAccounts.

OtherstatutOryiNfOrmatiON

BeforetheprofitandlossaccountsandBalance

SheetsoftheGroupandoftheCompanyweremade

out,theDirectorstookreasonablesteps:

1. toascertainthatproperactionhasbeentaken

inrelationtothewritingoffofbaddebtsandthe

makingofprovisionsfordoubtfuldebts;and

2. toensurethatanycurrentassetswhichwere

unlikelytorealiseintheordinarycourseof

businesstheirvaluesasshownintheaccounting

records,werewrittendowntoanamountwhich

theymightbeexpectedsotorealise.

Atthedateofthisreport,theDirectorsarenotaware

ofanycircumstances:

1. whichwouldrenderthatamountwrittenoffforbad

debtsortheamountoftheprovisionfordoubtful

debtsintheaccountsoftheGroupandofthe

Companyinadequatetoanysubstantialextent;

2. whichwouldrenderthevaluesattributedtothe

currentassetsintheaccountsoftheGroupand

theCompanymisleading;

3. whichhavearisenwhichrenderadherencetothe

existingmethodsofvaluationofassetsorliabilities

intheaccountsoftheGroupandoftheCompany

misleadingorinappropriate;and

4. nototherwisedealtwithinthisreportorinthe

accountsoftheGroupandoftheCompanythat

wouldrenderanyamountstatedintherespective

accountsmisleading.

Atthedateofthisreport,theredoesnotexist:

1. anychargeontheassetsoftheGrouporofthe

Companythathasarisensincetheendofthe

financialyearwhichsecurestheliabilitiesofany

otherperson;or

2. anycontingentliabilityinrespectoftheGroupor

oftheCompanythathasarisensincetheendof

thefinancialyear.

NocontingentorotherliabilityoftheGrouporof

theCompanyhasbecomeenforceable,orislikely

tobecomeenforceablewithintheperiodoftwelve

monthsaftertheendofthefinancialyearwhich,in

theopinionoftheDirectors,willormaysubstantially

affecttheabilityoftheGrouporoftheCompanyto

meettheirobligationsasandwhentheyfalldue.



IntheopinionoftheDirectors:

1. theresultsoftheoperationsoftheGroupandof

theCompanyforthefinancialyearhavenotbeen

substantiallyaffectedbyanyitem,transactionor

eventofamaterialandunusualnature.

2. noitem,transactionoreventofamaterialand

unusualnaturehasarisenintheintervalbetween

theendofthefinancialyearandthedateofthis

reportwhichislikelytoaffectsubstantiallythe

resultsoftheoperationsoftheGroupandofthe

Companyforthefinancialyearinwhichthisreport

ismade.

iNdepeNdeNtauditOrs

TheCompany’sAuditorsduringtheperiodunder

reviewwereMessrsErnst&Young,Chartered

Accountants.AsumofRs.820,000/-

(2008-Rs.735,000/-)waspaidtothemasauditfees

duringtheyearunderreviewandasumof

Rs.218,000/-(2008-Rs.364,780/-)waspaidbythe

Companyfortaxrelatedservices.

BasedonthedeclarationfromMessrsErnst&Young,

andasfarastheDirectorsareaware,theAuditorsdo

nothaveanyrelationshiporinterestintheCompany

oritssubsidiariesotherthanthosedisclosedinthe

aboveparagraph.

iNdepeNdeNtauditOr’srepOrt

TheIndependentAuditor’sReportonthefinancial

statementsisgivenonpage59oftheAnnualReport.

appOiNtmeNtOfauditOrs

Afterdueandcarefulconsideration,theDirectors

haverecommendedthereappointmentof

MessrsErnst&YoungastheCompany’sAuditors.

MessrsErnst&Young,CharteredAccountants,have

expressedtheirwillingnesstocontinueinofficeand

thereforearesolutionfortheirreappointmentwillbe

proposedattheforthcomingAnnualGeneralMeeting.

auditOrs’riGhttOiNfOrmatiON

EachpersonwhoisaDirectoroftheCompanyatthe

dateofapprovalofthisreportconfirmsthat:

sofaraseachDirectorisaware,thereisno

relevantauditinformationofwhichtheCompany’s

auditorsareunaware;eachDirectorhastakenallthestepsthatheorshe

oughttohavetakenasaDirectortomakehimself

orherselfawareofanyrelevantauditinformation

andtoestablishthattheCompany’sAuditorsare

awareofthatinformation.

aNNualGeNeralmeetiNG

The6thAnnualGeneralMeetingoftheCompanywill

beheldon26June2009attheAuditoriumofthe

ChamberofCommerce,No.50,NavamMawatha,

Colombo2.

TheNoticeconveningtheMeetingandtheAgenda

aregivenonpage113.

HemasHoldingsPLC

lalithdemel

huseinesufally

26May2009


HEMAS HOLDINGS PLC ANNUAL REPORT 2008/09 57

58 Statement of Directors’ Responsibility 59 Auditors’ Report 60 Income Statement61 Balance Sheet62 Statement of Changes in Equity64 Cash Flow Statement65 Notes to the Financial Statements

Financial StatementSFinancial StatementS

HEMAS HOLDINGS PLC ANNUAL REPORT 2008/0958

STATEMENT OF DIRECTORS’ RESPONSIBILITY

Financial statements

The following statement, which should be read in conjunction

with the Auditors’ Report, is made with a view to distinguishing

for stakeholders the respective responsibilities of the Directors

and of the Auditors in relation to the combined consolidated

financial statements.

The Directors are responsible for the preparation, integrity and

objectivity of the consolidated financial statements that fairly

present the state of affairs of the Company and the Group at the

end of the financial year and the net income and cash flows for

the year, and other information contained in this report.

To enable the Directors to meet these responsibilities,

• The Board and management set standards and management

implements systems of internal controls and accounting and

information systems aimed at providing reasonable assurance

that assets are safeguarded and the risk of fraud, error or

loss is reduced in a cost effective manner. These controls,

contained in established policies and procedures, include the

proper delegation of responsibilities and authorities within a

clearly defined framework, effective accounting procedure

and adequate segregation of duties;

• The Group’s internal audit function, which operates unimpeded

and independently from operational management, and has

unrestricted access to the Group Audit Committee, appraises

and when necessary, recommends improvements in the

system of internal controls and accounting practices, based on

audit plans that take cognizance of the relative degrees of risk

of each function or aspect of the business; and

• The Group Audit Committee, together with the Internal Audit

Department, plays an integral role in matters relating to

financial and internal control, accounting policies, reporting

and disclosure.

To the best of our knowledge and belief, based on the above,

the Directors are satisfied that no material breakdown in the

operation of the system of internal controls and procedures has

occurred during the year under review.

The Group consistently adopts appropriate and recognised

accounting policies and these are supported by reasonable

judgments and estimates on a consistent basis and provides

additional disclosures when compliance with the specific

requirements in the Accounting Standards are insufficient

to enable users to understand the impact of particular

transactions, other events and conditions on the Group’s

financial position and financial performance.

The financial statements of the Company and the Group have

been prepared in accordance with the Companies Act No. 07 of

2007 and the Sri Lanka Accounting Standards.

The Directors are of the opinion, based on their knowledge

of the Company, key processes in operation and specific

enquiries, that adequate resources exist to support the

Company on a going concern basis over the next year. These

financial statements have been prepared on that basis.

It is the responsibility of the Independent Auditors to report on

the combined consolidated financial statements. Their report to

the members of the Company and the Group is set out in the

Auditors’ Report. As far as the Directors are aware, there is no

relevant audit information of which the Company’s Auditors are

unaware. All steps which ought to have been taken as Directors

have been completed in order to be aware of the relevant audit

information and to establish that the Company’s Auditors are

aware of that information

ApprovAl of finAnciAl stAtements

The Directors’ report and the financial statements of the

Company and the Group were approved by the Board of

Directors on 26 May 2009.

By Order of the Board

Hemas corporate services (pvt) ltd.

Secretaries


AUDITORS’ REPORT

inDepenDent AUDitors’ report to tHe sHAreHolDers of HemAs HolDinGs plc

report on the financial statements

We have audited the accompanying financial statements of

Hemas Holdings PLC, the consolidated financial statements of

the Company and its subsidiaries which comprise the Balance

Sheets as at March 31, 2009, and the Income Statements,

Statements of Changes in Equity and Cash Flow Statements for

the year then ended, and a summary of significant Accounting

Policies and other explanatory notes.

management’s responsibility for the financial statements

Management is responsible for the preparation and fair

presentation of these financial statements in accordance with

Sri Lanka Accounting Standards. This responsibility includes

designing, implementing and maintaining internal control

relevant to the preparation and fair presentation of financial

statements that are free from material misstatement, whether

due to fraud or error, selecting and applying appropriate

accounting policies, and making accounting estimates that are

reasonable in the circumstances.

scope of Audit and Basis of opinion

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with Sri Lanka Auditing Standards. Those standards

require that we plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from

material misstatement.

An audit includes examining, on a test basis, evidence supporting

the amounts and disclosures in the financial statements. An

audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating

the overall financial statement presentation.

We have obtained all the information and explanations which

to the best of our knowledge and belief were necessary for

the purposes of our audit. We therefore believe that our audit

provides a reasonable basis for our opinion.

opinion

In our opinion, so far as appears from our examination, the

Company maintained proper accounting records for the year

ended March 31, 2009 and the financial statements give a true

and fair view of the Company’s state of affairs as at March 31,

2009 and its profit and cash flows for the year then ended in

accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true

and fair view of the state of affairs as at March 31, 2009 and the

profit and cash flows for the year then ended, in accordance

with Sri Lanka Accounting Standards, of the Company and

its subsidiaries dealt with thereby, so far as concerns the

shareholders of the Company.

report on other legal and regulatory requirements

In our opinion, these financial statements also comply with the

requirements of Section 151 (2) and Sections 153 (2) to 153 (7)

of the Companies Act No. 07 of 2007.

Colombo

May 26, 2009



INCOME STATEMENT

Group company

Year ended 31 March 2009 2008 2009 2008 Note rs. Rs. rs. Rs.

revenue 3 15,342,278,078 14,163,804,924 334,288,740 224,683,897

Cost of Sales (10,918,156,464) (10,138,724,592) – –

Gross profit 4,424,121,614 4,025,080,332 334,288,740 224,683,897

Dividend Income 4 1,417 738,337 141,156,406 157,137,674

Change in Fair Value of Investment Properties – 144,300,000 – 13,000,000

Other Income and Gains 5 98,051,012 132,069,295 (6,710,056) 61,535

Selling and Distribution Costs (1,058,105,058) (997,373,635) – –

Administrative Expenses (2,247,713,675) (1,810,790,050) (215,727,088) (221,977,034)

Finance Cost 6.1 (471,937,401) (346,564,545) (127,285,161) (42,484,908)

Finance Income 6.2 116,757,925 111,995,034 33,096,012 25,711,356

Share of Associate Company Loss (4,244,310) – – –

profit Before tax 7 856,931,524 1,259,454,768 158,818,853 156,132,521

Income Tax Expenses 8 (137,853,732) (108,624,845) (13,642,050) 10,851,735

profit for the Year 719,077,792 1,150,829,923 145,176,803 166,984,256

Attributable to:

Equity Holders of the Parent 775,127,792 1,135,418,670 145,176,803 166,984,256

Minority Interests (56,050,000) 15,411,253 – –

719,077,792 1,150,829,923 145,176,803 166,984,256

Earnings per Share - Basic 9 7.57 11.13 – –

Dividends per Share - Interim Paid 10 – 1.25 – 1.25

- Final Paid 1.25 – 1.25 –

The Accounting Policies and Notes on pages 65 through 108 form an integral part of the financial statements.



BALANCE SHEET

Group company

As at 31 March 2009 2008 2009 2008 Note rs. Rs. rs. Rs.

Assetsnon-current Assets Property, Plant and Equipment 11 7,180,680,242 5,182,388,866 66,830,110 46,469,680 Investment Property 12 1,178,709,950 1,178,709,950 271,709,950 271,709,950 Intangible Assets 13 191,214,493 173,621,726 – – Leasehold Property 14 64,910,569 67,976,287 – – Deferred Tax Assets 27.1 21,832,128 18,482,425 – – Loans Due from Related Parties 21 – – 163,123,048 – Investments in Subsidiaries 15 – – 4,842,485,806 4,353,762,768 Investments in Associates 16 – 205,793,202 – – Investments in Joint Ventures 17 – – 38,519,264 8,474,920 Other Long-Term Receivables 43,678,140 46,678,140 – – Other Investments 18 80,498,596 26,088,014 105,248,398 16,405,100 8,761,524,118 6,899,738,610 5,487,916,576 4,696,822,418

current AssetsInventories 19 1,308,795,107 1,263,114,406 – – Trade and Other Receivables 20 3,577,696,414 3,643,450,674 157,043,999 166,327,762 Loans Due from Related Parties 21 – 20,000,000 159,366,260 193,317,563 Investments 18 67,694 67,694 48,642 48,642 Tax Recoverable 100,105,359 91,994,344 897,624 6,532,260 Amounts Due from Related Parties 22 – 13,286,243 232,782,704 220,166,267 Short-Term Cash Investments 32 602,497,060 631,461,389 12,520,944 1,308,473 Cash and Cash Equivalents 32 485,126,578 567,512,348 10,186,344 16,446,618 6,074,288,212 6,230,887,098 572,846,517 604,147,585 total Assets 14,835,812,330 13,130,625,708 6,060,763,093 5,300,970,003

eQUitY AnD liABilitiesequity Attributable to equity Holders of the parent Stated Capital 23 1,369,222,534 1,329,012,573 1,369,222,534 1,329,012,573 Preference Share Capital 23.3 41,666,666 58,333,333 – – Reserves 24 764,634,844 783,413,227 368,073,839 372,663,859 Retained Earnings 4,852,766,322 4,262,938,674 2,695,408,071 2,665,572,306 shareholders’ funds 7,028,290,366 6,433,697,807 4,432,704,444 4,367,248,738 Minority Interest 837,062,062 604,966,737 – – total shareholders’ funds and minority interest 7,865,352,428 7,038,664,544 4,432,704,444 4,367,248,738

non-current liabilitiesNon-Interest Bearing Loans and Borrowings 25 13,781,847 25,945,564 – – Interest Bearing Loans and Borrowings 26 1,710,142,082 823,226,701 1,171,320,577 425,844,463 Deferred Tax Liabilities 27.2 136,307,726 139,563,588 38,979,758 37,047,574 Retirement Benefit Liability 28 140,756,884 145,535,317 19,108,128 13,276,545 Provisions 29 12,332,509 21,500,291 – – 2,013,321,048 1,155,771,461 1,229,408,463 476,168,582 current liabilities Trade and Other Payables 30 2,753,977,068 2,519,009,551 44,921,262 70,272,312 Dividends Payable 3,135,204 2,481,830 490,028 137,367 Income Tax Liabilities 46,854,466 17,907,223 – – Amounts Due to Related Parties 31 – – 61,473,505 4,366,647 Non-Interest Bearing Loans and Borrowings 25 1,207,000 1,207,000 – – Interest Bearing Loans and Borrowings 26 2,151,965,116 2,395,584,099 291,765,391 382,776,357 4,957,138,854 4,936,189,703 398,650,186 457,552,683 total shareholders’ funds, minority interest and liabilities 14,835,812,330 13,130,625,708 6,060,763,093 5,300,970,003

These financial statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

malinga ArsakularatneChief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these financial statements.

Signed for and on behalf of the Board by,

Husein esufally lalith De mel Chief Executive Officer Chairman


Colombo26 May 2009



STATEMENT OF CHANGES IN EQUITY

Attributable to Equity Shareholders of the Parent

Stated Preference Capital Exchange Revaluation Retained Minority Total Capital Share Redemption Reserve and Other Earnings Total Interests Equity Capital Reserve Capital Reserve Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

GroupBalance as at 31 march 2007 1,329,012,573 75,000,000 25,000,000 (77,741,757) 688,186,008 3,234,682,081 5,274,138,905 588,527,376 5,862,666,281 Profit for the Year – – – – – 1,135,418,670 1,135,418,670 15,411,253 1,150,829,923 Redemption of Preference Shares – (16,666,667) (25,000,000) – – 25,000,000 (16,666,667) – (16,666,667)Dividends Paid - Ordinary Shares (2008) – – – – – (113,980,315) (113,980,315) – (113,980,315) - Preference Shares – – – – – (8,037,900) (8,037,900) – (8,037,900)Transfer to/(from) during the Year - Overhaul Reserve, Heat Rate and Lube Oil – – – – 85,323,530 (85,323,530) – – – - Revaluation Reserve – – – – (8,252,985) 8,252,985 – – – - Other Reserves – – – – 7,500,000 (7,500,000) – – – Effect of Adopting SLAS 40 - Investment Property - Transfer to/(from) Revaluation Reserve – – – – 70,700,000 – 70,700,000 – 70,700,000 - Deferred Income Tax – – – – – 11,030,572 11,030,572 – 11,030,572 Adjustment in Respect of Changes in Group Holding – – – – (18,094,054) 63,396,111 45,302,057 1,028,108 46,330,165 Net Gain/(Loss) Recognised Directly in Equity - Deferred Income Tax – – – – 224,431 – 224,431 – 224,431 - Exchange Reserve – – – 35,568,054 – – 35,568,054 – 35,568,054 Balance as at 31 march 2008 1,329,012,573 58,333,333 – (42,173,703) 825,586,930 4,262,938,674 6,433,697,807 604,966,737 7,038,664,544

Profit for the Year – – – – – 775,127,792 775,127,792 (56,050,000) 719,077,792 Issue of Ordinary Shares under ESOS 40,209,961 – – – – – 40,209,961 – 40,209,961 Redemption of Preference Shares – (16,666,667) – – – – (16,666,667) – (16,666,667)Dividends Paid - Ordinary Shares (2008) – – – – – (115,341,038) (115,341,038) – (115,341,038) - Preference Shares – – – – – (7,678,265) (7,678,265) – (7,678,265)Transfer to/(from) during the Year - Overhaul Reserve, Heat Rate and Lube Oil – – – – 120,414,524 (120,414,524) – – – - Revaluation Reserve – – – – (4,667,453) 4,667,453 – – – - Other Reserves – – – – (100,000,000) 100,000,000 – – – Adjustment in Respect of Changes in Group Holding – – – – – (46,533,770) (46,533,770) 286,764,225 240,230,455 Net Gain/(Loss) Recognised Directly in Equity - Deferred Income Tax – – – – 224,431 – 224,431 1,381,100 1,605,531 - Exchange Reserve – – – (34,749,885) – – (34,749,885) – (34,749,885)Balance as at 31 march 2009 1,369,222,534 41,666,666 – (76,923,588) 841,558,432 4,852,766,322 7,028,290,366 837,062,062 7,865,352,428




Capital & Stated Revenue Retained Total Capital Reserve Earnings Rs. Rs. Rs. Rs.

company

Balance as at 31 march 2007 1,329,012,573 372,663,859 2,612,568,365 4,314,244,797

Profit for the Year – – 166,984,256 166,984,256

Dividends Paid - 2008 – – (113,980,315) (113,980,315)


Profit for the Year – – 145,176,803 145,176,803

Dividends Paid - 2008 – – (115,341,038) (115,341,038)

Issue of Ordinary Shares under ESOS 40,209,961 – – 40,209,961

Adjustment of Capital Reserve of Subsidiary – (4,590,020) – (4,590,020)



STATEMENT OF CHANGES IN EQUITY



CASH FLOW STATEMENT

Group company

Year ended 31 March 2009 2008 2009 2008 rs. Rs. rs. Rs.

operating Activities Profit Before Taxation 856,931,524 1,259,454,768 158,818,853 156,132,521

non-cash AdjustmentsDepreciation 500,480,653 432,672,721 22,685,551 27,417,748 Impairment 7,358,810 – – – Profit on Disposal of Property, Plant and Equipment (545,796) (6,896,558) (1,272,274) (604,969)Retirement Benefit Plan 22,299,035 42,106,221 (347,375) 6,491,426 Finance Cost 471,937,401 346,564,545 127,285,161 42,484,908 Investment Income (1,417) (738,337) (141,156,406) (157,137,674)Change in Fair Value of Investment Property – (144,300,000) – (13,000,000)(Profit)/Loss on Disposal of Associate – (50,518,087) – – Profit on Sale of Investments (46,533,770) (394,538) 9,655,923 – Amortisation of Intangibles 3,065,718 8,963,784 – – Amortisation of Other Long-Term Receivables 3,000,000 – – –

changes in Working capital (Increase)/Decrease in Trade and Other Receivables 65,754,260 (339,283,517) 9,283,762 (91,179,521)(Increase)/Decrease in Inventories 73,198,324 (272,084,172) – – (Increase)/Decrease in Amounts Due from Related Parties 14,587,988 (13,286,243) (6,300,442) (161,805,476)Increase/(Decrease) in Amounts Due to Related Companies (2,538,787) – 57,106,858 29,205 Increase/(Decrease) in Trade and Other Payables 120,255,609 350,445,432 (25,351,051) 53,057,150 Increase/(Decrease) in Provisions (9,167,782) 14,500,291 – – Finance Cost Paid (471,937,401) (346,564,545) (127,285,161) (42,484,908)Income Tax Paid (122,017,414) (333,962,793) (6,075,219) (8,853,340)Gratuity Paid (27,693,314) (17,402,197) (137,037) (4,596,474)net cash from/(Used in) operating Activities 1,458,433,641 929,276,775 76,911,132 (194,049,404)

investing Activities Purchase of Property, Plant and Equipment (1,666,759,197) (1,068,607,918) (43,563,431) (6,925,439)Acquisitions and Disposals of Subsidiaries/Associates (Note 33) 24,631,786 (114,504,689) (550,038,025) (17,904,100)Investment in Other Assets 41,887,089 (3,521,739) – – Other Investments (53,660,682) (2,270,385) (88,843,298) (3,000,000)Proceeds from Disposal of Property, Plant and Equipment 78,050,589 17,893,601 1,789,726 1,497,289 Proceeds from Disposal of Investments 17,024,700 902,644 17,024,700 – Redemption of Preference Shares (16,666,667) (16,666,667) – – Investment Income 1,417 738,337 141,156,406 157,137,674 net cash from/(Used in) investing Activities (1,575,490,965) (1,186,036,816) (522,473,922) 130,805,424

financing ActivitiesInterest Bearing Loans and Borrowings (Net) - Rupee Loan 843,428,764 393,835,379 525,325,331 118,347,547 - US$ Loan (641,986,367) (380,524,143) – – Proceeds from Issue of Ordinary Shares under ESOS 40,209,961 – 40,209,961 – Proceeds from Minority Shareholders 85,195,565 137,368,972 – – Dividends Paid - Ordinary Shares (121,740,004) (120,522,066) (114,988,377) (114,010,516) - Preference Shares (7,678,265) (8,037,899) – – Rental Deposits Received – 4,910,796 – – Finance Lease Paid – (2,802,243) – – net cash from/(Used in) financing Activities 197,428,130 24,228,796 450,546,915 4,337,031 Net Increase/(Decrease) in Cash and Cash Equivalents 80,372,331 (232,531,245) 4,984,125 (58,906,951)Cash and Cash Equivalents at the beginning of the Year (Note 32) (134,868,670) 97,662,575 16,826,272 75,733,223 Cash and Cash Equivalents at the end of the Year (Note 32) (54,496,339) (134,868,670) (21,810,397) 16,826,272




NOTES TO THE FINANCIAL STATEMENTS

1. corporAte informAtion

1.1 General

Hemas Holdings PLC is a public limited liability Company

listed in the Colombo Stock Exchange incorporated and

domiciled in Sri Lanka. The registered office and the

principal place of business are situated at No. 36, Bristol

Street, Colombo 01. Hemas Holdings PLC does not have

an identifiable parent of its own.

1.2 consolidated financial statements

The consolidated financial statements of the Company for

the year ended 31 March 2009 comprise the Company

(the ‘Company’) and its subsidiaries (the ‘Group’) and the

Group’s interest in its Associates.

1.3 principal Activities and nature of operations

During the year, the principal activities of the Company

were carrying out investment activities, and providing

management and administration services to other

Companies in the Group and the principal activities of the

Subsidiaries, Associates and Joint Ventures are disclosed

in Note 40 to the financial statements.

1.4 Date of Authorisation for issue

The consolidated financial statements of Hemas Holdings

PLC for the year ended 31 March 2009 were authorised

for issue, in accordance with a resolution of the Board of

Directors on 26 May 2009.

2.1 Basis of preparation

The financial statements have been prepared on a historical

cost basis, except for investment properties and land

and buildings that have been measured at fair value. The

financial statements are presented in Sri Lanka Rupees. The

preparation and presentation of these financial statements is

in compliance with the Companies Act No. 07 of 2007.

2.1.1 statement of compliance

The consolidated financial statements of the Group

have been prepared in accordance with the Sri Lanka

Accounting Standards (SLAS).

2.1.2 Going concern

The Directors have made an assessment of the Company’s

ability to continue as a going concern and they do not

intend either to liquidate or to cease trading.

2.1.3 consolidation policy - principles of consolidation

a. subsidiaries

The financial statements of the Group represent the

consolidation of the financial statements of Hemas

Holdings PLC and all its Subsidiaries as at 31 March 2009.

The financial statements of the Subsidiaries are prepared

for the same reporting year as the Parent Company using

consistent accounting policies.

All intra-group balances, income and expenses, unrealised

gains and losses resulting from intra-group transactions are

eliminated in full.

Subsidiaries are fully consolidated from the date of

acquisition being the date of which the Group obtains

control and continue to be consolidated untill the date that

such control ceases.

Minority Interests represent the portion of profit or

loss and net assets that is not held by the Group and

presented separately in the Income Statement and within

equity in the consolidated Balance Sheet, separately

from Parent shareholders’ equity. Acquisitions of minority

interests are accounted for using the Parent entity

extension method, where the difference between the

consideration and the book value of the share of the net

assets acquired is recognised as goodwill.

b. Associate companies

The investments in Associate Companies are accounted for

using the equity method of accounting. An Associate is an

entity in which the Company has significant influence.

Under the equity method, the investment in the Associates

are carried in the Balance Sheet at cost plus post-

acquisition changes in the Group’s share of net assets

of the Associates, net of any dividends paid by such

Associates. The Income Statement reflects the share of

the results of operations of each Associate. Where there

has been a change recognised directly in the equity

of the Associate, the Company recognises its share of

any changes and discloses this, where applicable, in

the Statement of Changes in Equity. Profits and losses

resulting from transactions between the Group and the

Associates are eliminated to the extent of the interest in

the Associate.



c. Joint ventures

The Group has an interest in Joint Ventures which are

jointly controlled entities. A Joint Venture is a contractual

arrangement whereby two or more parties undertake an

economic activity that is subject to joint control, and a

jointly controlled entity is a Joint Venture that involves the

establishment of a separate entity in which each venture

has an interest. The Group recognises its interest in the

Joint Venture using proportionate consolidation. The

Group combines its share of each of the assets, liabilities,

income and expenses of the Joint Venture with the similar

items, line by line, in its financial statements. The financial

statements of the Joint Ventures are prepared for the

same reporting year as the Parent Company except for

Hellman Worldwide Logistics (Pvt) Ltd., where the financial

statements are prepared for 31 December 2008. All the

material transactions are adjusted for the 3-month period

ended 31 March 2009. Accounting policies of the Joint

Ventures are consistent with the Parent Company.

d. Business combination and Goodwill

Business Combinations are accounted for using the

purchase method. This involves recognising identifiable

assets (including previously unrecognised intangible assets)

and liabilities (including contingent liabilities and excluding

future restructuring) of the acquired business at fair value.

Goodwill acquired in a business combination represents

the excess of the cost of the business combination over

the Group’s interest in the net fair value of the acquirer’s

identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost

less any accumulated impairment losses.

negative Goodwill

Negative goodwill arising on business combinations

comprises the excess of the Group’s interest in the net

fair value of the acquirer’s identifiable assets, liabilities

and contingent liabilities over the cost of the business

combination.

Negative goodwill arising on business combinations is

credited to the Income Statement.

e. changes in Group companies

The Group has formed N-able (Pvt) Ltd., a fully owned

subsidiary and Deithlem (Pvt) Ltd. as a 80% owned

subsidiary. The Group has acquired its stake in Hemas

Hospitals (Pvt) Ltd. from 49.7% to 65%, which is currently

accounted as a subsidiary. Further the Group has disposed

51% stake of Hemas International Freight (Pvt) Ltd. and this

is currently recognised as a Jointly Controlled entity and

the Group has entered into a joint venture agreement with

Skynet Worldwide Express (Pvt) Ltd.

Name of Hemas Shipping (Pvt) Ltd. has been changed

to Hemas Transportation (Pvt) Ltd. and Clinical Solutions

(Pvt) Ltd. has been changed to Hemas Clinical Research

Services (Pvt) Ltd.

f. country of incorporation

All Subsidiaries, Associates and Joint Venture Companies

are incorporated in Sri Lanka, except for the following:

name of country of reporting subsidiary incorporation currency

HIF Logistics Pakistan Pakistan Rupee (PKR)

(Pvt) Ltd.

2.1.4 comparative information

The accounting policies have been consistently applied

by the Group and are consistent with those used in the

previous year.

Previous year’s figures and phrases have been rearranged

wherever necessary, to conform to the current year’s

presentation.

2.1.5 Discontinuing operations

A discontinuing operation is a clearly distinguishable

component of the Group’s business that is abandoned or

terminated pursuant to a single plan, and which represents

a separate major line of industry or geographical area

of operations.

2.2 changes in Accounting policies

The accounting policies adopted are consistent with those

used in the previous year except as follows:

The Group and its Subsidiaries have adopted SLAS 16 on

Employees’ Benefits (Revised 2006). This adoption did not

have a significant impact on the financial statements [refer

Accounting Policy 2.4.14 (a)]

2.3 significant Accounting estimates and Assumptions

Judgments

In the process of applying the Company’s accounting

policies, management has made the following judgments,

apart from those involving estimations, which have the

most significant effect on the amounts recognised in the

financial statements.



Deferred tax Assets

Deferred tax assets are recognised for all unused tax

losses to the extent that it is probable that taxable profit

will be available against which the losses can be utilised.

Significant management judgment is required to determine

the amount of deferred tax assets that can be recognised,

based upon the likely timing and level of future taxable

profits together with future tax planning strategies.

impairment of Goodwill

The Group determines whether goodwill is impaired at

least on an annual basis. This requires an estimation of

the ‘value in use’ of the cash-generating units to which

the goodwill is allocated. Estimating a value in use

amount requires management to make an estimate of the

expected future cash flows from the cash-generating unit

and also to choose a suitable discount rate in order to

calculate present value of those cash flows.

fair value of Unquoted equity investments

The unquoted equity instruments have been valued

based on the expected cash flows discounted at current

rates applicable for items with similar terms and risk

characteristics. This valuation requires the Company to

make estimates about expected future cash flows and

discount rates, and hence they are subject to uncertainty.

estimates and Assumptions

The key assumptions concerning the future and other key

sources of estimation uncertainty at the Balance Sheet

date, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities

within the next financial year, are discussed below. The

respective carrying amounts of assets and liabilities are

given in related notes to the financial statements.

Defined Benefit plans

The cost of defined benefit plans - gratuity is determined

using actuarial valuations. The actuarial valuation involves

making assumptions about discount rates, expected

rates of returns on assets, future salary increases and

mortality rates. Due to the long-term nature of these plans,

such estimates are subject to significant uncertainty. All

assumptions are reviewed at each reporting date.

2.4 summary of significant Accounting policies

2.4.1 foreign currency translations and Hedging

The financial statements are presented in Sri Lanka

Rupees, which is the Company’s functional and

presentation currency. Transactions in foreign currencies

are initially recorded at the functional currency rate

ruling at the date of the transaction. Monetary assets

and liabilities denominated in foreign currencies are

retranslated at the functional currency rate of exchange

ruling at the Balance Sheet date. All differences are taken

to the Income Statement.

Non-monetary items that are measured in terms of

historical cost in a foreign currency are translated using the

exchange rates as at the dates of the initial transactions.

Non-monetary items measured at fair value in a foreign

currency are translated using the exchange rates at the date

when the fair value was determined. The resulting gains and

losses are accounted for in the Income Statement.

The assets and liabilities of the foreign subsidiary is

translated into the presentation currency of the Group at

the rate of exchange ruling at the Balance Sheet date, and

their Income Statements are translated at the weighted

average exchange rates for the year. The exchange

differences arising on the translation are taken directly

to a separate component of equity. On disposal of a

foreign entity, the deferred cumulative amount recognised

in equity relating to that particular foreign operation is

recognised in the Income Statement.

In respect of transactions which meet the conditions for

special hedge accounting in relation to cash flow hedges,

the portion of the exchange gain or loss on the hedge

instrument that is determined to be an effective hedge

is directly in equity through the Statement of Changes in

Equity and ineffective portion is recognised in the Income

Statement.

2.4.2 taxation

a. current taxes

Current income tax assets and liabilities for the current

and prior periods are measured at the amount expected

to be recovered from or paid to the Commissioner General

of Inland Revenue. The tax rates and tax laws used

to compute the amount are those that are enacted or

substantively enacted by the Balance Sheet date.



The provision for income tax is based on the elements

of income and expenditure as reported in the financial

statements and computed in accordance with the

provisions of the Inland Revenue Act.

Current income tax relating to items recognised

directly in equity is recognised in equity and not in the

Income Statement.

b. Deferred taxation

Deferred income tax is provided, using the liability method,

on all temporary differences at the Balance Sheet date

between the tax bases of assets and liabilities and their

carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all

taxable temporary differences except:

• Where the deferred income tax liability arises from the

initial recognition of an asset or liability in a transaction

that is not a business combination and, at the time of

the transaction, affects neither the accounting profit nor

taxable profit or loss; and

• In respect of taxable temporary differences associated

with investments in Subsidiaries, Associates and

interests in Joint Ventures, except where the timing

of the reversal of the temporary differences can

be controlled and it is probable that the temporary

differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all

deductible temporary differences, carry-forward of unused

tax assets and unused tax losses, to the extent that it is

probable that taxable profit will be available against

which the deductible temporary differences, and the

carry-forward of unused tax assets and unused tax losses

can be utilised except:

• Where the deferred income tax asset relating to the

deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that

is not a business combination and, at the time of the

transaction, affects neither the accounting profit nor

taxable profit or loss; and

• In respect of deductible temporary differences

associated with investments in Subsidiaries, Associates

and interests in Joint Ventures, deferred tax assets are

only recognised to the extent that it is probable that the

temporary differences will reverse in the foreseeable

future and taxable profit will be available against which

the temporary differences can be utilised.

The carrying amount of deferred income tax assets is

reviewed at each Balance Sheet date and reduced to the

extent that it is no longer probable that sufficient taxable

profit will be available to allow all or part of the deferred

income tax asset to be utilised.

Deferred income tax assets and liabilities are measured

at the tax rates that are expected to apply to the year

when the asset is realised or the liability is settled, based

on tax rates (and tax laws) that have been enacted or

substantively enacted at the Balance Sheet date.

Deferred income tax relating to items recognised directly

in equity is recognised in equity and not in the Income

Statement.

c. tax on Dividend income

Tax on dividend income from Subsidiaries and Associates

is recognised as an expense in the Consolidated Income

Statement.

2.4.3 Borrowing costs

Borrowing costs are recognised as an expense in the

period in which they are incurred, except to the extent

where borrowing costs that are directly attributable to

the acquisition, construction, or production of an asset

that takes a substantial period of time to get ready for its

intended use or sale, are capitalised as part of that asset.

2.4.4 intangible Assets (other than Goodwill)

Intangible assets acquired separately are measured on

initial recognition at cost. The cost of intangible assets

acquired in a business combination is fair value as at

the date of acquisition. Following the initial recognition

of the intangible assets, the cost model is applied

requiring the assets to be carried at cost, less any

accumulated amortisation and accumulated impairment

losses. Internally-generated intangible assets, excluding

capitalised development costs are not capitalised and

expenditure is reflected in the Income Statement in the

year in which the expenditure is incurred.



The useful lives of intangible assets are assessed to be

either finite or indefinite.

Intangible assets with finite lives are amortised over the

useful economic life and assessed for impairment whenever

there is an indication that the intangible asset may be

impaired. The amortisation period and the amortisation

method for an intangible asset with a finite useful life is

reviewed at least at each financial year end. Changes

in the expected useful life or the expected pattern of

consumption of future economic benefits embodied in

the asset are accounted for by changing the amortisation

period or method, as appropriate, and treated as changes

in accounting estimates. The amortisation expense on

intangible assets with finite lives is recognised in the

Income Statement in the expense category consistent with

the function/nature of the intangible asset. Amortisation has

commenced when the assets were available for use.

Intangible assets with indefinite useful lives are tested for

impairment annually either individually or at the cash-

generating unit level. Such intangibles are not amortised.

The useful life of an intangible asset with an indefinite

life is reviewed annually to determine whether indefinite

life assessment continues to be supportable. If not, the

change in the useful life assessment from indefinite to

finite is made on a prospective basis.

Intangible assets that are not yet available for sale are

tested for impairments at each financial year end, even if

there is no indication that the asset is impaired.

Gains or losses arising from derecognition of an intangible

asset are measured as the difference between the net

disposal proceeds and the carrying amount of the asset

and are recognised in the Income Statement when the

asset is derecognised.

research and Development costs

Research costs are expensed as incurred. Intangible assets

arising from development expenditure on an individual

project are recognised only when the Company can

demonstrate the technical feasibility of completing the

intangible assets so that it will be available for use or sale, its

intention to complete and its ability to use or sell the assets,

how the assets will generate future economic benefits, the

availability of resources to complete the assets and the ability

to measure reliably the expenditure during the development.

During the period of development, the assets are tested

for impairment annually. Following the initial recognition

of the development expenditure, the cost model is

applied requiring the assets to be carried at cost,

less any accumulated amortisation and accumulated

impairment losses. Amortisation of the assets begins

when development is completed and the asset is available

for use. It is amortised over the period of expected future

sales. During the period in which the asset is not yet in

use, it is tested for impairment annually.

2.4.5 inventories

Inventories are valued at the lower of cost and net

realisable value, after making due allowances for obsolete

and slow moving items. Net realisable value is the price

at which inventories can be sold in the ordinary course of

business, less the estimated cost of completion and the

estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present

location and conditions is accounted for using the

following cost formulae:

Raw Materials - At actual cost on first-in first-out/

weighted average basis.

Foods and Beverages - At actual cost on weighted

Stocks average basis.

Finished Goods and - At cost of direct materials,

Work-in-Progress direct labour and an appropriate

proportion of fixed production

overheads based on normal

operating capacity.

Consumables and - At actual cost on first-in first-out

Spares basis.

Goods-in-Transit and - At actual cost.

Other Stocks

Medical Supplies - At actual cost on first-in first-out

basis.

2.4.6 trade and other receivables

Trade receivables are stated at the amounts they are

estimated to realise net of allowances for bad and doubtful

receivables.

Other receivables and dues from Related Parties are

recognised at cost, less allowance for bad and doubtful

receivables.



2.4.7 cash and cash equivalents

Cash and cash equivalents are defined as cash in hand,

demand deposits and short-term highly liquid investments,

readily convertible to known amounts of cash and subject

to insignificant risk of changes in value.

For the purpose of cash flow statement, cash and cash

equivalents consist of cash in hand and deposits in banks

net of outstanding bank overdrafts. Investments with

short maturities i.e., three months or less from the date of

acquisition are also treated as cash equivalents.

2.4.8 property, plant and equipment

a. cost and valuation

All items of Property, Plant and Equipment are initially

recorded at cost. Where items of Property, Plant and

Equipment are subsequently revalued, the entire class

of such assets is revalued. Revaluations are made with

sufficient regularity to ensure that their carrying amounts

do not differ materially from their fair values at the Balance

Sheet date. Subsequent to the initial recognition as an

asset at cost, revalued Property, Plant and Equipment

are carried at revalued amounts, less any subsequent

depreciation thereon. All other Property, Plant and

Equipment are stated at historical cost, less accumulated

depreciation and less accumulated impairment in value.

When an asset is revalued, any increase in the carrying

amount is credited directly to a revaluation surplus unless it

reverses a previous revaluation decrease relating to the same

asset, which was previously recognised as an expense. In

these circumstances, the increase is recognised as income

to the extent of the previous write down. When an asset’s

carrying amount is decreased as a result of a revaluation,

the decrease is recognised as an expense unless it reverses

a previous increment relating to that asset, in which case

it is charged against any related revaluation surplus, to the

extent that the decrease does not exceed the amount held

in the revaluation surplus in respect of that same asset.

Any balance remaining in the revaluation surplus in respect

of an asset, is transferred directly to retained earnings on

retirement or disposal of the asset.

b. restoration costs

Expenditure incurred on repairs or maintenance of

Property, Plant and Equipment in order to restore

or maintain the future economic benefits expected

from originally assessed standard of performance, is

recognised as an expense when incurred.

c. Depreciation

Depreciation is calculated on a straight-line method over

the useful life of all Property, Plant and Equipment other

than freehold land.

The principal annual rates used by the Companies in the

Group are as follows:

Freehold Buildings 1.5% - 10%

Leasehold Buildings Over the lease term

Plant and Machinery 6% - 25%

Power Plant Over 180 months

Furniture and Fittings 7% - 25%

Office and Factory Equipments 10% - 33.33%

Computer Hardware and Software 25% - 33.33 %

Motor Vehicles 16.66% - 25%

Crockery and Cutlery 50% - 100%

Revertment 5% - 10%

Buildings on Leasehold Land are depreciated over the

remaining lease period.

d. Derecognition

An item of Property, Plant and Equipment is derecognised

upon disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising

on derecognition of the asset (calculated as the difference

between the net disposal proceeds and the carrying

amount of the asset) is included in the Income Statement

in the year the asset is derecognised.

2.4.9 capital Work-in-progress

Capital work-in-progress is stated at cost. These are

expenses of a capital nature directly incurred in the

construction of buildings and major plant and machinery

awaiting capitalisation.

Hemas Southern Hospitals (Pvt) Ltd. and Okanda Power

Grid (Pvt) Ltd. commenced projects to develop a chain

of hospitals and hydro power plant, respectively. The

expenses that are capital in nature are accounted as capital

work-in-progress until the completion of the projects.

2.4.10 leased property

Leasehold property comprising land use rights

obtained on a long-term basis, is stated at the recorded

carrying values as at the effective date of the Sri Lanka

Accounting Standard 19 - Leases in line with Ruling of

the Urgent Issues Task Force of The Institute of Chartered



Accountants of Sri Lanka. Such carrying amounts are

amortised over the remaining lease term or useful life of

the leased property whichever is shorter.

2.4.11 leases

a. finance leases

Property, Plant and Equipment on finance leases, which

effectively transfer to the Group substantially all of the

risk and benefits incidental to ownership of the leased

item are capitalised at the inception of the lease at the fair

value of leased property or, if lower, at the present value of

minimum lease payments. Capitalised leased assets are

disclosed as Finance Leases under Property, Plant and

Equipment and depreciated over the period the Group is

expected to benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor

together with interest payable over the period of lease

is shown as a liability. Lease payments are apportioned

between the finance charges and reduction of the lease

liability so as to achieve a constant rate of interest on the

remaining balance of the liability. The interest payable

over the period is transferred to an interest in suspense

account. The interest element of the rental obligations

pertaining to each financial year is charged to Income

Statement over the period of the lease.

b. operating leases

Leases where the lessor effectively retains substantially all

the risks and benefits of ownership over the leased term,

are classified as operating leases.

Lease rentals paid under operating leases are recognised

as an expense in the Income Statement on a straight-line

basis over the lease term.

2.4.12 investments

initial recognition:

Cost of investment includes purchase cost and acquisition

charges such as brokerages, fees, duties and bank

regulatory fees. The Company distinguishes and presents

current and non-current investments in the Balance Sheet.

measurement:

a. current investments

Current investments are stated at lower of cost and

market value determined on an aggregate portfolio basis.

The cost of an investment is the cost of acquisition

inclusive of brokerage fees and stamp duty.

Unrealised gains and losses on current investments

carried at market value i.e., reduction to market value and

reversals of such reductions required to reflect current

investments at the lower of cost and market value, are

credited or charged to Income Statement.

b. long-term investments

Quoted and unquoted investments in shares held on a

long-term basis are stated at cost.

The cost of the investment is the cost of acquisition

inclusive of brokerage fees, stamp duties and bank fees.

The carrying amount of long-term investments is reduced

to recognise a decline, other than temporary, in the value of

investments, determined on an individual investment basis.

In the Companies’ financial statements, investments in

Subsidiaries were accounted for in the equity method

until 31 March 2006. With effect from 1 April 2006 in

accordance with the revised SLAS 26 - the Investment

in Subsidiaries are accounted for at the carrying value

as that date and any investment made after 1 April 2006

is carried at cost, net of any provision for other than

temporary diminution in value.

In the Company’s financial statements, investments in

Subsidiaries were carried at fair value and Associates

were carried at cost, net of any provision for other than

temporary diminution in value.

c. investment property

Investment properties are measured initially at cost,

including transaction costs. The carrying amount includes

the cost of replacing part of an existing investment

property at the time that cost is incurred if the recognition

criteria are met; and excludes the costs of day to day

servicing of an investment property. Subsequent to initial

recognition, investment properties are stated at fair value,

which reflects market conditions at the Balance Sheet

date. Gains or losses arising from changes in the fair

values of investment properties are included in the Income

Statement in the year in which they arise.



Investment properties are derecognised when either they

have been disposed of or when the investment property is

permanently withdrawn from use and no future economic

benefit is expected from its disposal. Any gains or losses

on the retirement or disposal of an investment property

are recognised in the Income Statement in the year of

retirement or disposal.

Transfers are made to investment property when, and

only when, there is a change in use, evidenced by the end

of owner occupation, commencement of an operating

lease to another party or completion of construction

or development. Transfers are made from investment

property when, and only when, there is a change in use,

evidenced by commencement of owner occupation or

commencement of development with a view to sale.

For a transfer from investment property to owner occupied

property or inventories, the deemed cost of property

for subsequent accounting is its fair value at the date of

change in use. If the property occupied by the Group as an

owner-occupied property becomes an investment property,

the Group accounts for such property in accordance with

the policy stated under Property, Plant and Equipment up

to the date of change in use. For a transfer from inventories

to investment property, any difference between the fair

value of the property at that date and its previous carrying

amount is recognised in the Income Statement. When the

Group completes the construction or development of a self-

constructed investment property, any difference between

the fair value of the property at that date and its previous

carrying amount is recognised in the Income Statement.

d. other investments

Treasury Bills and other interest bearing securities held for

resale in the near future to benefit from short-term market

movements are accounted for at cost, plus relevant

proportion of the discounts or premiums.

2.4.13 provisions

Provisions are recognised when the Company has a present

obligation (legal or constructive) as a result of a past event,

where it is probable that an outflow of resources embodying

economic benefits will be required to settle the obligation

and a reliable estimate can be made of the amount of

the obligation. If the effect of the time value of money is

material, provisions are determined by discounting the

expected future cash flows at a pre-tax rate that reflects

current market assessments of the time value of money

and, where appropriate, the risks specific to the liability.

2.4.14 retirement Benefit liability

a. Defined Benefit plan - Gratuity

The Company measures the present value of the promised

retirement benefits of gratuity which is a defined benefit

plan with the advice of an actuary every 3 years using

the Projected Unit Credit Method. Actuarial gains and

losses are recognised as income or expenses over

the expected average remaining working lives of the

participants of the plan.

Accordingly, the employee benefit liability is based on the

actuarial valuation carried out by Messrs Actuarial and

Management Consultants (Pvt) Ltd., Actuaries.

The key assumptions used by the Actuary include the

following:

Rate of interest 12%

Rate of salary increase 10%

Retirement age 50-60 years

However, as per the payment of Gratuity Act No. 12 of

1983, this liability only arises upon completion of 5 years

of continued service.

b. Defined contribution plans - employees’ provident fund and employees’ trust fund

Employees are eligible for Employees’ Provident Fund

contributions and Employees’ Trust Fund contributions

in line with the respective statutes and regulations. The

Company contributes 12% and 3% of gross emoluments

of employees to Employees’ Provident Fund and

Employees’ Trust Fund, respectively. Some employees of

the Group are eligible for Mercantile Services Provident

Society Fund, for which the Group contributes 12% of

gross emoluments of employees.

2.4.15 impairment of Assets

The Group assesses at each reporting date whether there

is an indication that an asset may be impaired. If any

such indication exists, or when annual impairment testing

for an asset is required, the Group makes an estimate of

the asset’s recoverable amount. An asset’s recoverable

amount is the higher of an asset’s or cash-generating

unit’s fair value, less costs to sell and its value in use and

is determined for an individual asset or cash-generating

unit, unless the asset or cash-generating unit does not

generate cash inflows that are largely independent of

those from other assets or cash-generating units. Where



the carrying amount of an asset exceeds its recoverable

amount, the asset is considered impaired and is written

down to its recoverable amount. In assessing value in

use, the estimated future cash flows are discounted to

their present value using a pre-tax discount rate that

reflects current market assessments of the time value of

money and the risks specific to the asset. In determining

fair value, less costs to sell, an appropriate valuation

model is used. These calculations are corroborated by

valuation multiples, quoted share prices for publicly traded

subsidiaries or other available fair value indicators.

Impairment losses of continuing operations are recognised

in the Income Statement in those expense categories

consistent with the function of the impaired asset, except for

property previously revalued where the revaluation was taken

to equity. In this case, the impairment is also recognised in

equity up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at

each reporting date as to whether there is any indication

that previously recognised impairment losses may no

longer exist or may have decreased. If such indication

exists, the Group makes an estimate of recoverable

amount. A previously recognised impairment loss is

reversed only if there has been a change in the estimates

used to determine the asset’s recoverable amount since

the last impairment loss was recognised. If that is the

case the carrying amount of the asset is increased to

its recoverable amount. That increased amount cannot

exceed the carrying amount that would have been

determined, net of depreciation, had no impairment loss

been recognised for the asset in prior years. Such reversal

is recognised in the Income Statement unless the asset

is carried at revalued amount, in which case the reversal

is treated as a revaluation increase. Impairment losses

recognised in relation to goodwill are not reversed for

subsequent increases in its recoverable amount.

The following criteria are also applied in assessing

impairment of specific assets:

Goodwill

Goodwill is reviewed for impairment, annually or more

frequently if events or changes in circumstances indicate

that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the

recoverable amount of the cash-generating unit (or group

of cash-generating units), to which the goodwill relates.

Where the recoverable amount of the cash-generating

unit (or group of cash-generating units) is less than the

carrying amount of the cash-generating unit (group

of cash-generating units) to which goodwill has been

allocated, an impairment loss is recognised. Impairment

losses relating to goodwill cannot be reversed in future

periods. The Group performs its annual impairment test of

goodwill as at 31 March.

intangible Assets

Intangible assets with indefinite useful lives are tested for

impairment annually either individually or at the cash-

generating unit level, as appropriate.

Associates

After application of the equity method, the Group determines

whether it is necessary to recognise an additional impairment

loss of the Group’s investment in its Associates. The Group

determines at each Balance Sheet date whether there is

any objective evidence that the investment in Associate is

impaired. If this is the case, the Group calculates the amount

of impairment as being the difference between the fair value

of the Associate and the acquisition cost and recognises the

amount in the Income Statement.

2.4.16 income statement

revenue recognition

Revenue is recognised to the extent that it is probable that

the economic benefits will flow to the Company and the

revenue and associated costs incurred or to be incurred

can be reliably measured. Revenue is measured at the fair

value of the consideration received or receivable net of trade

discounts, value added taxes, and other sales taxes and after

eliminating intra-group sales. The following specific criteria

are used for the purpose of recognition of revenue.

a. sale of Goods

Revenue from sale of goods is recognised when the

significant risks and rewards of ownership of the goods

have passed to buyer; with the Group retaining neither

continuing managerial involvement to the degree usually

associated with ownership, nor effective control over the

goods sold.



b. rendering of services

Revenue from rendering of services is recognised in the

accounting period in which the services are rendered or

performed.

c. energy supplied

Revenue from energy supplied is recognised, upon

delivery of energy to Ceylon Electricity Board and will be

adjusted for capacity charge for Minimum Guaranteed

Energy Amount (MGEA) at the end of the calendar year if

there has been a curtailment. (Delivery of electrical energy

shall be completed when electrical energy meets the

specifications as set out in Power Purchase Agreement

(PPA) is received at the metering point.)

d. Apartment and food and Beverages sales

Apartment revenue is recognised on the rooms occupied

on a daily basis, and food and beverages sales are

accounted for at the time of sales.

e. turnover-Based taxes

Turnover-based taxes include Value Added Tax, Economic

Service Charge, National Building Tax and Turnover Tax,

which are payable to Provincial Council in respect of

trading activities and Tourism Development Levy, which

is payable to the Ceylon Tourist Board by all companies

licenced by the Board. Companies in the Group pay such

taxes in accordance with the respective statutes.

f. interest

Interest income is recognised on an accrual basis.

g. Dividends

Dividend income is recognised on a cash basis (net of

dividend tax).

h. rental income

Rental income is recognised on an accrual basis. Rental

income arising on investment properties is accounted for

on a straight-line basis over the lease terms.

i. others

Other income is recognised on an accrual basis.

2.5 Business segment reporting

A business segment is a distinguishable component of

an enterprise that is engaged in providing an individual

product or service or a group of related products or

services that is subject to risk and returns that are different

from those of other business segments. The accounting

policies adopted for segment reporting are the same

accounting policies adopted for preparing and presenting

consolidated financial statements of the Group.

Inter-segment transfers are based on fair market prices.

2.6 employee share ownership scheme (esos)

Two Employee Share Option Plans (ESOP) were approved

by the shareholders of the Company in the years 2003 and

2006, whereby the Company issued a total of 4,468,699

Ordinary Shares to the senior management and employees

based on performance. The options were required to be

exercised between the period 01 April 2004 and 31 March

2009. The two schemes have however since lapsed.

In the year 2008, the Board recommended a further

3,000,000 shares by way of an Employee Share

Ownership Scheme (ESOS). The new scheme was

approved by the Members and came into effect on 9th

December 2008.

The 1st tranche of 650,000 shares were issued to the

Trustees on 6 February 2009 at Rs. 62/- per share, on

behalf of the Senior Management. These shares will be

held in trust for the eligible employees until such time as

the shares are transferred to them in terms of the ESOS

Trust - 2008.



Group company

Year ended 31 March 2009 2008 2009 2008 rs. Rs. rs. Rs.

3. revenUe

summary

Sales of Goods 8,296,823,958 7,258,864,579 – –

Rendering of Services 7,045,454,120 6,904,940,345 334,288,740 224,683,897

15,342,278,078 14,163,804,924 334,288,740 224,683,897

Segment information is given in Note 38 to these financial statements.

4. DiviDenD income

Income from Investments - Related Parties – – 141,156,406 157,137,674

- Others 1,417 738,337 – –

1,417 738,337 141,156,406 157,137,674

5. otHer income AnD GAins

Profit on Disposal of Investments 16,677 60,490,599 (9,655,923) –

Gain/Surplus on Disposal and Acquisition 36,830,451 7,344,168 – –

Rental Income 7,868,566 2,730,000 988,393 –

Commission Income 8,902,297 12,285,856 – –

Exchange Gain 20,911,678 24,564,624 – –

Sundry Income 23,521,343 24,654,048 1,957,474 61,535

98,051,012 132,069,295 (6,710,056) 61,535

6. finAnce cost AnD income

6.1 finance cost

Interest Expense on Overdrafts 147,632,938 146,366,561 214,692 308,798

Interest Expense on Loans and Borrowings - Rupee 161,745,392 62,316,832 127,070,469 42,176,110

- USD 160,507,877 131,506,742 – –

Debenture Interest 111,890 4,619,774 – –

Bank Guarantee Charges 1,767,548 833,677 – –

Finance Charges on Lease Liabilities 171,756 920,959 – –

471,937,401 346,564,545 127,285,161 42,484,908

6.2 finance income

Interest Income - Related Parties – – 30,264,289 24,569,767

- Others 116,757,925 111,995,034 2,831,723 1,141,589

116,757,925 111,995,034 33,096,012 25,711,356



Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

7. profit Before tAx

stated after charging/(crediting)

Auditors’ Fees 6,801,925 5,626,908 820,000 735,000

Depreciation - Cost 452,814,945 405,657,234 22,685,551 27,417,748

- Valuation 45,400,303 24,137,263 – –

- Leases 2,265,405 2,878,230 – –

Donations 409,909 742,774 – 115,000

Profit on Disposal of Property, Plant and Equipment (545,796) (6,896,558) (1,272,274) (604,969)

Bad Debts Written-off 2,369,117 29,766,210 – –

Provision for Doubtful Debts 5,281,645 7,486,645 – –

Provision for Obsolete Stocks 21,519,278 13,128,859 – –

staff costs includes:

Defined Benefit Plan Cost - Gratuity 22,914,881 42,106,221 (347,375) 6,491,426

Defined Contribution Plan Cost - MSPS/EPF/ETF 90,788,544 71,539,729 8,730,431 7,342,144

Legal Fees 1,055,845 1,633,561 135,000 20,000

8. income tAx expense

current income tax

Current Tax Expense on Ordinary Activities

for the Year (8.1) 128,369,384 127,911,495 11,709,866 3,982,928

Under/(Over) Provision of Current Taxes in respect

of prior years 8,165,893 1,791,612 – –

Tax on Dividends 3,813,961 7,513,509 – –

Deferred income tax

Deferred Taxation Charge/(Reversal) (8.2) (2,495,506) (28,591,772) 1,932,184 (14,834,663)

137,853,732 108,624,845 13,642,050 (10,851,735)

8.1 reconciliation between current tax expense and the Accounting profit

Accounting Profit Before Tax 856,931,524 1,259,454,768 158,818,853 156,132,521

Intra Group Adjustment/Share of Profits

of Subsidiaries 299,016,100 408,478,386 – –

1,,155,947,624 1,667,933,154 158,818,853 156,132,521

Aggregate Disallowed Items 388,877,154 426,316,131 50,272,263 49,341,037

Aggregate Allowable Expenses (278,742,329) (739,976,982) (16,973,918) (25,031,886)

Aggregate Allowable Income (158,812,010) (148,922,033) (141,156,406) (157,144,088)

Incentives not recognised in the Income Statements – (613,812,422) – 61,535

Taxable Profit 1,107,270,439 591,537,848 50,960,792 23,359,119

Tax Losses Brought Forward and Utilised (89,069,992) (20,075,644) (17,836,812) (3,604,154)

1,018,200,447 571,462,204 33,123,981 19,754,965

Current Income Tax Expense 128,369,384 127,911,495 11,709,866 3,982,928

The Group tax expense is based on taxable profit of each company.



Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

8.2 Deferred tax expense/(income)

Deferred Tax Expense/(Income) arising due to

- Origination and Reversal of Timing Differences (2,495,506) (28,591,772) 1,932,184 (14,834,663)

(2,495,506) (28,591,772) 1,932,184 (14,834,663)

8.3 Deferred Tax has been computed using current effective tax rates applicable to each company.

8.4 Applicable tax rates

As per the Inland Revenue Act No. 10 of 2006, all resident companies are liable to effective Income Tax of 35% (2008 - 35%),

with the exception of the below stated Companies.

Trading income of Serendib Hotels PLC, Hotel Sigiriya PLC, Stafford Hotels PLC, Miami Beach Hotels Ltd., Serendib Leisure

Management Ltd., Hemas Travels (Pvt) Ltd. and Hemtours (Pvt) Ltd. is taxed at 15%, while other income of these Companies are

taxed at 35% (2008 - 35%).

Hemas Developments (Pvt) Ltd., has obtained BOI approval under Section 17 and it enjoys a 7 year tax holiday commencing from

year of assessment 1998/99 in which the enterprise makes profits in relation to its transactions in that year or not later than 5 years

from the date of its first commercial operation whichever is earlier. Thereafter the applicable tax rate would be 2% of Revenue.

Pursuant to the agreement dated 28 August 2003, entered into with the Board of Investment under Section 17 of the Board

of Investment Law, Heladhanavi Ltd. is exempt from Income Tax for a period of 10 years from the year in which the Company

commences to make profits or any year of assessment not later than two years from the date of commencement of commercial

operations of the enterprise, whichever is earlier. After the expiration of the said tax exemption period the income of the

enterprise shall be charged at the rate of 15%. However, other operating income of the Company is liable for income tax.

Pursuant to agreement entered into with the Board of Investment under Section 17 of the Board of Investment Law No. 4 of

1978 Vishwa BPO (Pvt) Ltd., Hemas Hospitals (Pvt) Ltd. and Hemas Southern Hospitals (Pvt) Ltd. are exempt from income

tax for a period of three (3) years and five (5) years respectively, reckoned from the year of assessment, in which the Company

commences to make profits or any year of assessment not later than two years from the date of commencement of commercial

operations of the companies, whichever is earlier. After the expiration of the tax exempted period, profits are charged at the rate

of 10% for the next two (2) years. After the expiration of the above mentioned tax rate exemption of 10%, the companies’ profits

are liable for tax at 20% thereon.

Pursuant to an agreement dated 9th July 2007 entered into with the Board of Investment under Section 17 of the Board of

Investment Law, for the business of Hemas Manufacturing (Pvt) Ltd. for the manufacture and/or marketing of soap, personal

care items and other Fast Moving Consumer Goods at its relocated factory in Dankotuwa under the 300 Enterprises programme,

Inland Revenue Act relating to the imposition, payment and recovery of income tax shall not apply for a period of 5 years from the

year in which the Enterprise commences commercial operations at the relocated factory, which will expire in the year 2012/13.

After the expiry of the aforesaid tax exemption period, the profits of the Company shall be charged at a concessionary tax rate of

10% for a period of 2 years and 20% thereafter.



Pursuant to an agreement entered into with BOI, profit of the Giddawa Hydro Power (Pvt) Ltd. is exempted from Income

Tax for a period of five (5) years reckoned from the year of assessment as may be determined by the Board, in which the

Company commences to make profits or any year of assessment not later than two (2) years from the date of commencement

of commercial operations of the Company, which ever is earlier. As such the exemption period would expire in 2012/2013.

After the expiration of the aforesaid tax exemption period, the profit of the Company shall be charged at the rate of 10% for a

period of two (2) years immediately succeeding the last date of the tax exemption period. After the expiration of the aforesaid

concessionary tax rate of 10%, the profits of the Company shall for any year of assessment be charged at the rate of 20%.

9. eArninGs per sHAre

9.1 Basic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders of the

Company by the weighted average number of ordinary shares outstanding during the year. The weighted average number of

ordinary shares outstanding during the year and the previous year are adjusted for events that have changed the number of

ordinary shares outstanding, without a corresponding change in the resources such as a bonus issue.

9.2 The following reflects the income and share data used in the Basic Earnings Per Share computation.

Group

2009 2008 rs. Rs.

Amount used as the numerator:

Profit for the Year 775,127,792 1,135,418,670

Less: Preference Dividends (7,678,265) (8,037,900)

Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share 767,449,527 1,127,380,770

2009 2008 number Number

number of ordinary shares used as Denominator:

Weighted Average number of Ordinary Shares in issue Applicable to

Basic Earnings Per Share 101,416,457 101,308,124

9.3 There were no potentially dilutive ordinary shares outstanding at any time during the year.



2009 2008 rs. Rs.

10. DiviDenD per sHAre - GroUp/compAnY

10.1 Dividends paid

Interim out of 2007/08 Profits - Gross – 126,635,155

- Tax on Dividends – (12,654,840)

- Net – 113,980,315

Final out of 2007/08 Profits Net dividend paid to ordinary shareholders 113,971,640 –

Withholding tax deducted at source from

Dividend out of Profits 1,369,398 –

Gross ordinary dividend Paid 115,341,038 –

Gross ordinary dividend Paid 115,341,038 –

Withholding tax deducted at source from

Dividend out of Dividend received 11,294,117 –

Gross Dividend 126,635,155 –

10.2 Dividend per share

- Interim out of 2007/08 Profits – 1.25

- Final out of 2007/08 Profits 1.25 –

10.3 The Final dividend was on 4 July 2008 (Interim on 21 February 2008).

Balance Additions/ Disposals/ Balance As at Transfers/ Transfers As at 01.04.2008 Acquisitions 31.03.2009 Rs. Rs. Rs. rs.

11. propertY, plAnt AnD eQUipment

11.1 Group

Gross carrying Amount

At cost/cost incurred since last revaluation

Freehold Land 38,259,641 147,177,033 – 185,436,074

Freehold Buildings 34,139,510 1,966,170,263 (26,522,543) 1,973,787,230

Plant and Machinery 3,438,186,605 330,422,399 (37,544,300) 3,731,064,704

Furniture and Fittings 293,378,194 86,375,936 (12,008,952) 367,745,178

Office and Factory Equipment 145,596,541 499,375,436 (6,218,512) 638,753,465

Computer Hardware and Software 341,007,691 63,570,381 (35,749,100) 368,828,972

Motor Vehicles 293,953,352 181,516,210 (64,686,656) 410,782,906

Revertment 19,108,922 – – 19,108,922

4,603,630,456 3,274,007,658 (182,730,063) 7,695,508,051

At valuation

Freehold Land 434,266,370 – – 434,266,370

Freehold Buildings 641,412,150 – – 641,412,150

Buildings on Leasehold Land 332,140,755 3,882,991 – 336,023,746

1,407,819,275 3,882,991 – 1,411,702,266

Assets on finance lease

Motor Vehicles 13,939,889 – (1,438,596) 12,501,293

13,939,889 – (1,438,596) 12,501,293

total value of Assets 6,025,389,620 3,278,490,649 (184,168,659) 9,119,711,610



Balance Charge for Disposals/ Balance As at the year Transfers As at 01.04.2008 31.03.2009 Rs. Rs. Rs. rs.

11. propertY, plAnt AnD eQUipment (contd...)

11.1 Group (contd...)

Depreciation

At cost

Freehold Buildings 6,801,007 8,052,933 (705,638) 14,148,302

Plant and Machinery 935,555,880 254,227,369 (11,597,605) 1,178,185,644

Furniture and Fittings 147,517,624 33,030,690 (9,506,696) 171,041,618

Office and Factory Equipment 74,041,836 24,303,507 (2,851,476) 95,493,867

Computer Hardware and Software 240,664,460 69,962,864 (28,476,339) 282,150,985

Motor Vehicles 166,137,497 61,793,465 (51,318,429) 176,612,533

Revertment 1,696,117 1,444,117 – 3,140,234

1,572,414,421 452,814,945 (104,456,183) 1,920,773,183

At valuation

Freehold Buildings 46,106,967 36,733,251 (769,088) 82,071,130

Buildings on Leasehold Land 26,577,657 8,667,052 – 35,244,709

72,684,624 45,400,303 (769,088) 117,315,839

Assets on finance lease

Motor Vehicles 8,349,609 2,265,405 (644,096) 9,970,918

8,349,609 2,265,405 (644,096) 9,970,918

total Depreciation 1,653,448,654 500,480,653 (105,869,367) 2,048,059,940

capital Work-in-progress

At Cost 792,947,900 1,702,967,429 (2,404,386,756) 91,528,572

At Valuation 17,500,000 – – 17,500,000

810,447,900 1,702,967,429 (2,404,386,756) 109,028,572

2009 2008 rs. Rs.

net Book values

At Cost 5,883,763,440 3,841,663,935

At Valuation 1,294,386,427 1,335,134,651

Assets on Finance Lease 2,530,375 5,590,280

Total Carrying Amount 7,180,680,242 5,182,388,866

11.1.1 The Land and Buildings of Hemas Manufacturing (Pvt) Ltd., Stafford Hotels PLC & Miami Beach Hotels Ltd. were last

revalued during the financial year 2004/05 by Mr. D.S.A. Senaratne (A.I.V.) an independent valuer. The results of such revaluation

was incorporated in these financial statements from its effective date which is 31 March 2005. Such assets were valued on an open

market value for existing use basis. The surplus arising from the revaluation was transferred to a Revaluation Reserve.

11.1.2 The Land and Buildings of Peace Haven Resort Ltd. was last revalued at the beginning of the financial year 2006/07 by

Mr. Arthur Perera (A.I.V.) an independent valuer. The results of such revaluation was incorporated in these financial statements

from its effective date which is 1st April 2006. Such assets were valued on an open market value for existing use basis. The

surplus arising from the revaluation was transferred to a Revaluation Reserve. The next revaluation will be carried out in

accordance with the Group policy.



11.1.3 During the financial year, the Group acquired Property, Plant and Equipment to the aggregate value of Rs. 3,278,490,649/-

(2008 - Rs. 1,068,607,918/-). Cash payments amounting to Rs. 1,666,759,197/- (2008 - Rs. 1,068,607,918/-) was paid during the year

of purchases of Property, Plant and Equipment.

Balance Additions/ Disposal/ Balance As At Transfers/ Transfers As at 01.04.2008 Acquisitions 31.03.2009 Rs. Rs. Rs. rs.

11.2 company

At cost

Roadways 6,975,688 – – 6,975,688

Furniture and Fittings 11,278,512 95,291 – 11,373,803

Office Equipment 11,427,553 151,230 (133,622) 11,445,161

Computer Hardware and Software 68,583,452 8,889,519 (643,500) 76,829,471

Motor Vehicles 13,123,015 34,427,391 (1,910,125) 45,640,281

total value of Assets 111,388,220 43,563,431 (2,687,247) 152,264,404

Balance Charge Disposals/ Balance As at For the Transfers As at 01.04.2008 Year 31.03.2009 Rs. Rs. Rs. rs.

Depreciation

At cost

Furniture and Fittings 2,802,330 1,407,858 – 4,210,189

Office Equipment 6,897,215 1,231,162 (83,939) 8,044,437

Computer Hardware and Software 49,893,140 14,627,059 (175,732) 64,344,467

Motor Vehicles 5,325,855 5,419,472 (1,910,125) 8,835,202

total Depreciation 64,918,540 22,685,551 (2,169,796) 85,434,295

2009 2008 rs. Rs.

net Book values

At cost 66,830,110 46,469,680

11.2.1 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs. 43,563,431/-

(2008 - Rs. 6,925,439/-) by means of cash.

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

12. investment propertY

Investment Properties at Fair Value at the

beginning of the Year 1,178,709,950 963,709,950 271,709,950 258,709,950

Change in Fair Value of Investment Properties

during the Year – 215,000,000 – 13,000,000

Investment Properties at Fair Value at the

end of the Year 1,178,709,950 1,178,709,950 271,709,950 271,709,950



Group

2009 2008 rs. Rs.

13. intAnGiBle Assets

13.1 non-current

Goodwill 50,174,273 41,099,987

Brands 132,521,739 132,521,739

Project Development Expenses 8,518,482 –

191,214,494 173,621,726

13.1.1 Goodwill

Balance at the beginning of the Year 41,099,987 20,664,878

Acquired during the Year 9,074,286 20,435,109

Impairment/Amortisation during the Year – –

Balance at the end of the Year 50,174,273 41,099,987

13.1.2 Brands


Acquired during the Year – 3,521,739


13.1.3 Development expenses

Balance at the beginning of the Year – 5,898,074

Acquired during the year 9,892,271 –

Impairment/Written Off during the Year (1,373,789) (5,898,074)

Balance at the end of the Year 8,518,482 –

Hemas Group and its Subsidiaries annually carry out an impairment test on all its intangible assets. Impairment tests are carried

out as follows:

Goodwill - The business acquisition to which the goodwill is attributable is valued based on the earnings growth method.

Assumptions applied in such computations are reviewed each year.

Brands - Brands are valued based on the earnings growth method and assumptions applied are reviewed each year.

Development Expenses - These include all expenditure attributable to the intangible asset during its development stage. The

technical feasibility at completing the project/product and the business case for future economic

benefits are reassessed each year. Group

2009 2008 rs. Rs.

14. leAseHolD propertY

cost/valuation



Amortisation


Amortised during the Year 3,065,718 3,065,718


carrying value at the end of the Year 64,910,569 67,976,287



Serendib Hotels PLC has obtained leasehold rights to two lots of land situated in Bentota from the Sri Lanka Tourist Board by the

agreement dated 19/02/1969 and 28/02/1973 respectively (the lease expires on 01/02/2019 and 28/02/2033 respectively) and Hotel

Sigiriya PLC has obtained leasehold rights to land situated at Sigiriya from the Sri Lanka Tourist Board by the agreement dated

25/07/1974. Based on the Ruling 11 of Urgent Issues Task Force (UITF) of The Institute of Chartered Accountants of Sri Lanka, it

was stated at revalued amounts. As a result of a revision to said ruling, the Company now carries such leasehold rights to land, at

the values recorded in the Balance Sheet as at the effective date of SLAS 19 - Leases.

The revised UITF ruling does not permit further revaluation of leasehold property. An amount of Rs. 42,542,432/- and Rs. 3,148,141/- in

Serendib Hotels PLC and Hotel Sigiriya PLC respectively is remaining in equity under revaluation surplus relating to previous revaluation

of Leasehold rights to land.

Group Holding company Holding company 2009 2008 2009 2008 2009 2008 % % % % rs. Rs.

15. investment in sUBsiDiAries

15.1 non-Quoted investments

Hemas Corporate Services (Pvt) Ltd. 100 100 100 100 39,890,699 16,890,699

Hemas Developments (Pvt) Ltd. 100 100 73 73 632,316,443 632,316,443

Hemas Power (Pvt) Ltd. 100 100 3 2.2 384,693,081 374,693,081

Hemas Manufacturing (Pvt) Ltd. 100 100 100 100 890,662,863 890,662,863

Hemas Marketing (Pvt) Ltd. 100 100 100 100 650,031,275 650,031,275

Hemas Foods (Pvt) Ltd. 100 100 100 100 24,845,575 24,845,575

Hemas Pharmaceuticals (Pvt) Ltd. 100 100 100 100 380,947,388 380,947,388

Hemas Surgicals and Diagnostics (Pvt) Ltd. 100 100 100 100 23,956,545 23,956,545

Hemas Travels (Pvt) Ltd. 100 100 100 100 123,876,586 123,876,586

Hemas International Freight (Pvt) Ltd. – 100 – 100 – 61,314,987

Hemas Air Services (Pvt) Ltd. 100 100 100 100 64,687,574 64,687,574

Forbes Air Services (Pvt) Ltd. 100 100 100 100 97,581,714 97,581,714

Discover the World Marketing (Pvt) Ltd. 100 100 100 100 4,665,732 4,665,732

Hemas Aviation (Pvt) Ltd. 100 100 100 100 1,909,963 1,909,963

Exchange & Finance Investments Ltd. 100 100 100 100 9,411,793 9,411,793

Hemtours (Pvt) Ltd. 100 100 100 100 209,911,882 209,911,882

Leisure Asia Investments Ltd. 100 100 100 100 257,559,015 257,559,015

Peace Haven Resorts Ltd. 95.5 95.5 95.5 95.5 336,454,612 336,454,612

Hemas Transportation (Pvt) Ltd.

(Formerly known as Hemas Shipping (Pvt) Ltd.) 100 100 100 100 300,000 300,000

ACX International (Pvt) Ltd. 100 100 100 100 21,788,300 21,788,300

Mowbray Hotels Ltd. 89 89 89 89 46,201,442 46,201,442

Far Shipping Lanka (Pvt) Ltd. 100 100 100 100 3,000,000 3,000,000

Hemas Hospitals (Pvt) Ltd. 65 – 56 – 507,038,025 –

Vishwa BPO (Pvt) Ltd. 100 100 100 – 10,000,000 –

4,721,730,507 4,233,007,469

15.2 Quoted investments

Serendib Hotels PLC 51 51 22.4 22.4 120,755,299 120,755,299

total 4,842,485,806 4,353,762,768



Holding % carrying Disposal/ carrying value Transfer of value 2009 2008 2008 Investment 2009 % % rs. Rs. rs.

16. investments in AssociAtes

Group

Hemas Hospitals (Pvt) Ltd. – 49.7 205,793,202 (205,793,202) –

205,793,202 (205,793,202) –

Group Holding company Holding company 2009 2008 2009 2008 2009 2008 % % % % rs. Rs.

17. investment in Joint ventUre

Hellmann Worldwide Logistics (Pvt) Ltd. 49 49 49 49 8,474,920 8,474,920

Hemas International Freight (Pvt) Ltd. 49 – 49 – 30,044,344 –

Heladhanavi Ltd. 50 50 – – – –

38,519,264 8,474,920

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

18. otHer investments

summary

non-current

Investments in Equity Securities (Note 18.1/18.2) 80,498,596 26,088,014 105,248,398 16,405,100

80,498,596 26,088,014 105,248,398 16,405,100

current

Investment in Equity Securities (Note 18.1.2/18.2.1) 67,694 67,694 48,642 48,642

67,694 67,694 48,642 48,642

total carrying value of other investments 80,566,290 26,155,708 105,297,040 16,453,742

no. of shares carrying value market value Carrying Value Market Value 2009 2008 2009 2009 2008 2008 rs. rs. Rs. Rs.

18.1 investments in equity securities - non-current

Group

a. Quoted

Overseas Realty (Ceylon) PLC 1,000 1,000 10,000 7,750 10,000 12,000

Eden Hotels Lanka PLC 127 127 861 1,238 861 1,778

Galadari Hotels PLC 2,000 2,000 18,750 15,500 18,750 22,500

Blue Diamond Jewellers PLC 1,300 1,300 3,900 1,950 3,900 3,510

Royal Palm Beach Hotels PLC 85 85 676 2,699 676 3,400

Kotmale Holdings PLC 40,000 40,000 400,000 380,000 400,000 410,000

Mercantile Shipping PLC 426,223 – 53,843,298 42,302,633 – –

total investment in Quoted

equity securities 54,277,485 42,711,770 434,187 453,188



carrying value Carrying Value 2009 2008 rs. Rs.

18. otHer investments (contd...)

18.1 investments in equity securities (contd...) b. non-Quoted

Felix Hotels Ltd. – 25,930

Rainforest Ecology (Pvt) Ltd. 10,020,000 10,000,000

SLFFA Cargo Services Ltd. 201,111 357,511

CT Capital (Pvt) Ltd. 16,000,000 16,000,000

Giddawa Hydro Power (Pvt) Ltd. 100 –

26,221,210 26,383,441

Less: Provision for fall in Value – (729,614)

total investment in non-Quoted equity securities 26,221,211 25,653,827

total equity investments 80,498,696 26,088,014


18.1.2 investments in equity securities - current

Group

a. Quoted

John Keells Holdings PLC 726 726 48,642 45,557 48,642 86,939

Ceylon Theatres PLC 143 143 24,000 3,857 24,000 –

Lankem Ceylon PLC 1,500 1,500 14,500 43,125 14,500 69,750

87,142 92,359 87,142 156,689

Less: Provision for fall in Value (30,823) – (30,823) –

total investments in Quoted equity

securities 56,319 92,359 56,319 156,689

b. non-Quoted

Coca Cola Beverages Sri Lanka Ltd. 100 100 5,275 5,275

Carsons Marketing Ltd. 100 100 1,600 1,600

Glaxo Ceylon Ltd. 150 150 4,500 4,500

total investments in non-Quoted equity

securities 11,375 11,375

total equity investments 67,694 92,359 67,694 156,689

18.2 investment in equity securities - non-current

company

a. Quoted

Overseas Realty (Ceylon) PLC 500 500 5,000 3,875 5,000 6,000

Kotmale Holdings PLC 40,000 40,000 400,000 380,000 400,000 410,000

Mercantile Shipping PLC 426,223 – 53,843,298 42,302,633 – –

54,248,298 42,686,508 405,000 416,000




18. otHer investments (contd...)

18.2 investment in equity securities - non current (contd...)

b. non-Quoted

CT Capital (Pvt) Ltd. 1,600,000 1,600,000 16,000,000 16,000,000

Giddawa Hydro Power (Pvt) Ltd. 350,001 1 35,000,100 100

51,000,100 16,000,100

total carrying value of equity investment 105,248,398 16,405,100

18.2.1 investment in equity securities - current

a. Quoted

John Keells Holdings PLC 726 726 48,642 45,557 48,642 86,939

total carrying value of equity investment 48,642 45,557 48,642 86,939

The market value of Company’s investment portfolio has been obtained from official valuation list as at 31 March published by the

Colombo Stock Exchange. Provision has not been made for temporary fluctuations in market prices of long-term investments. Group

2009 2008 rs. Rs.

19. inventories

Raw Materials 261,091,046 248,782,334

Work-in-Progress 18,489,753 32,531,227

Finished Goods and Other Stocks 968,517,597 942,996,370

Goods in Transit 82,215,988 52,278,702

1,330,314,385 1,276,588,633

Less: Provision for Obsolete Stocks (21,519,278) (13,474,227)

1,308,795,107 1,263,114,406

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

20. trADe AnD otHer receivABles

20.1 summary

trade Debtors

Related Parties (20.2) – – 97,314,722 116,049,842

Others 1,832,645,857 1,862,889,861 2,717,562 3,052,504

Ceylon Electricity Board 1,022,061,415 1,071,780,425 – –

Less: Provision for Doubtful Debts (8,350,363) (9,562,663) – –

2,846,356,909 2,925,107,623 100,032,284 119,102,346

other Debtors Related Parties (20.3) – – 8,536,247 9,711,402

Others 512,123,648 571,425,387 31,422,348 20,904,756

Advances and Prepayments 190,389,329 140,775,506 6,574,579 6,041,250

Less: Provision for Doubtful Debts (37,796,416) (46,683,401) – –

3,511,073,470 3,590,625,115 146,565,458 155,759,754

Loans to Company Officers (20.4) 66,622,944 52,825,559 10,478,541 10,568,008

3,577,696,414 3,643,450,674 157,043,999 166,327,762



Group company

Relationship 2009 2008 2009 2008 rs. Rs. rs. Rs.

20.2 trade Dues from related parties

Hemas Pharmaceuticals (Pvt) Ltd. Subsidiary – – 45,100,803 41,076,128

Hemas Corporate Services (Pvt) Ltd. Subsidiary – – 343,091 790,524

Hemas International Freight (Pvt) Ltd. Joint Venture – – 1,845 1,450,340

Hemas Travels (Pvt) Ltd. Subsidiary – – 3,401,858 10,844,446

Hemas Power (Pvt) Ltd. Subsidiary – – 250,420 100,575

Hemas Marketing (Pvt) Ltd. Subsidiary – – 17,100 16,857,536

Hemas Air Services (Pvt) Ltd. Subsidiary – – 3,412,127 10,588,473

Hemtours (Pvt) Ltd. Subsidiary – – 101,738 1,088,363

Hemas Surgicals and Diagnostics

(Pvt) Ltd. Subsidiary – – – 12,795

Exchange & Finance Investment Ltd. Subsidiary – – 7,129 7,188

Hemas Southern Hospitals

(Pvt) Ltd. Subsidiary – – 544,271 158,125

Hemas Hospitals (Pvt) Ltd. Subsidiary – – 5,041,503 171,518

Hemas Aviation (Pvt) Ltd. Subsidiary – – 5,476 74,602

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 565,529 11,332,235

Forbes Air Services (Pvt) Ltd. Subsidiary – – 29,157,918 21,275,000

ACX International (Pvt) Ltd. Subsidiary – – 1,195,199 221,994

Hemas Development (Pvt) Ltd. Subsidiary – – 1,136,273 –

Diethelm Travels (Pvt) Ltd. Subsidiary – – 465,212 –

Heladhanavi Ltd. Joint Venture – – 820,139 –

Giddawa Hydro Power (Pvt) Ltd. Subsidiary – – 2,430 –

Serendib Leisure Management

(Pvt) Ltd. Subsidiary – – 74,007 –

Hellmann Worldwide Logistics

(Pvt) Ltd. Joint Venture – – 76,534 –

Far Shipping Lanka (Pvt) Ltd. Subsidiary – – 4,727,369 –

N-Able (Pvt) Ltd. Subsidiary – – 866,751 –

– – 97,314,722 116,049,842



Group company


20.3 other Dues from related parties

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 982,040 4,641,718

Hemtours (Pvt) Ltd. Subsidiary – – 992 1,560,554

Hemas International Freight (Pvt) Ltd. Joint Venture – – 17,773 296,573

Hemas Development (Pvt) Ltd. Subsidiary – – 165,587 154,437

Far Shipping Lanka (Pvt) Ltd. Subsidiary – – 1,723 287,500

Hemas Corporate Services

(Pvt) Ltd. Subsidiary – – 4,131,875 1,860,423

Forbes Air Services (Pvt) Ltd. Subsidiary – – 86,128 362,690

Hemas Travels (Pvt) Ltd. Subsidiary – – – 547,507

Diethelm Travels (Pvt) Ltd. Subsidiary – – 432,904 –

Vishwa BPO (Pvt) Ltd. Subsidiary – – 220,749 –



Hemas Hospitals (Pvt) Ltd. Subsidiary – – 1,311,921 –

Hemas Power (Pvt) Ltd. Subsidiary – – 76,708 –


N-Able (Pvt) Ltd. Subsidiary – – 1,051,875 –

Okanda Power (Pvt) Ltd. Subsidiary – – 31,600 –

– – 8,536,247 9,711,402

20.4 loans to company officers:

summary

Balance at the beginning of the Year 52,825,559 43,742,550 10,568,008 11,366,756

Loans Granted During the Year 49,576,911 28,458,228 5,497,490 3,821,822

Less: Repayments (35,779,526) (19,375,219) (5,586,957) (4,620,570)

Balance at the end of the Year 66,622,944 52,825,559 10,478,541 10,568,008



Group company


21. loAns DUe from relAteD pArties

non-current

Hemas Corporate Services (Pvt) Ltd. Subsidiary – – 13,123,048 –

Hemas Hospitals (Pvt) Ltd. Subsidiary – – 150,000,000 –

– – 163,123,048 –

current


Hemas Corporate Services (Pvt) Ltd. Subsidiary – – – 5,539,999

Hemas Power (Pvt) Ltd. Subsidiary – – 31,250,000 96,407,564

Hemas Marketing (Pvt) Ltd. Subsidiary – – – 3,100,000

Hemas International Freight (Pvt) Ltd. Joint Venture – – 12,000,000 18,000,000

Hemas Travels (Pvt) Ltd. Subsidiary – – – 15,000,000

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – – 8,000,000


(Pvt) Ltd. Subsidiary – – – 1,000,000

ACX International (Pvt) Ltd. Subsidiary – – 600,000 600,000

Hemas Hospitals (Pvt) Ltd. Subsidiary – 20,000,000 8,316,260 20,000,000

Hemas Clinical Research

Services (Pvt) Ltd. Subsidiary – – 1,150,000 2,150,000


(Pvt) Ltd. Joint Venture – – 2,000,000 3,520,000

Giddawa Hydro Power (Pvt) Ltd. Subsidiary – – 21,450,000 –

Hemtours (Pvt) Ltd. Subsidiary – – 33,000,000 –

N-Able (Pvt) Ltd. Subsidiary – – 12,500,000 –


(Pvt) Ltd. Subsidiary – – 1,000,000 –

Mowbray Hotels (Pvt) Ltd. Subsidiary – – 1,100,000 –

– 20,000,000 159,366,260 193,317,563



Group company


22. AmoUnts DUe from relAteD pArties

Hemtours (Pvt) Ltd. Subsidiary – – 23,245,813 14,925,000

Hemas Marketing (Pvt) Ltd. Subsidiary – – 4,604,631 –

Hemas International Freight (Pvt) Ltd. Joint Venture – – – 19,904,137


Hemas Corporate Services (Pvt) Ltd. Subsidiary – – 849,654 36,131



Hemas Air Services (Pvt) Ltd. Subsidiary – – 12,148,300 3,372,425

Hemas Travels (Pvt) Ltd. Subsidiary – – 2,000,000 1,000,000


Forbes Air Services (Pvt) Ltd. Subsidiary – – 44,175,565 3,678,375

Vishwa BPO (Pvt) Ltd. Subsidiary – – 3,963,695 13,237,822


(Pvt) Ltd. Joint Venture – – 54,562 25,154

ACX International (Pvt) Ltd. Subsidiary – – 81,740 107,287

Far Shipping Lanka (Pvt) Ltd. Subsidiary – – – 9,822

Hemas Clinical Research

Services (Pvt) Ltd. Subsidiary – – 1,248,602 32,123

Hemas Hospitals (Pvt) Ltd. Subsidiary – 13,286,243 40,385,055 40,000,000

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 25,000,000 60,046,575

Hemas Aviation (Pvt) Ltd. Subsidiary – – 2,415 –


Exchange & Finance Investment Ltd. Subsidiary – – 3,594 –


Mowbray Hotels (Pvt) Ltd. Subsidiary – – 126,638 –

– 13,286,243 232,782,704 220,166,267

2009 2008

no. rs. No. Rs.

23. stAteD cApitAl - GroUp/compAnY

23.1 Fully Paid Ordinary Shares (23.1.1) 101,958,124 1,369,222,534 101,308,124 1,329,012,573

23.1.1 fully paid ordinary shares

Balance at the beginning of the Year 101,308,124 1,329,012,573 101,308,124 1,329,012,573

Issue of Shares under Employee Shares

Ownership Plan 650,000 40,209,961 – –

Balance at the end of the Year 101,958,124 1,369,222,534 101,308,124 1,329,012,573

23.2 rights, preferences and restrictions of classes of capital

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per

share at a meeting of the Company.



23.3 preference share capital

23.3.1 terms of redemption of 12% cumulative redeemable preference shares

12% Cumulative Redeemable Preference Shares of Rs. 200 Mn (Group Share - Rs. 100 Mn) has been issued to DFCC Bank PLC for

initial fund requirement for the construction of the plant of Heladhanavi Ltd. These shares are to be redeemed by the Company in

12 equal semi-annual instalments, commencing after 24 months from the first date of subscription (from December 2005).

The preference shares do not carry the right to vote.

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

24. reserves

a. revaluation and other capital reserve

Balance at the beginning of the year 825,586,930 688,186,008 372,663,859 372,663,859

Revaluation Reserve during the Year – – – –

Adjustment in Capital Reserve of Subsidiaries – – (4,590,020) –

Transfer to during the Year 15,747,071 84,570,545 – –

Net Gain/(Loss) Recognised Directly in Equity 224,431 224,431 – –

Effect of Adopting SLAS 40 (Investment Property) – 70,700,000 – –

Adjustment in Respect of Changes in Group Holding – (18,094,054) – –

Balance at the end of the year 841,558,432 825,586,930 368,073,839 372,663,859

b. capital redemption reserve

Balance at the beginning of the Year – 25,000,000 – –

Transfer from Retained Earnings – (25,000,000) – –

Balance at the end of the Year – – – –

c. exchange reserve

Balance at the beginning of the Year (42,173,703) (77,741,757) – –

Transfer from/(to) Retained Earnings (34,749,885) 35,568,054 – –

Balance at the end of the Year (76,923,588) (42,173,703) – –

total reserves 764,634,844 783,413,227 368,073,839 372,663,859

2009 2009 2008 2008 Amount Amount Amount Amount repayable repayable 2009 Repayable Repayable 2008 Within 1 Year After 1 Year total Within 1 Year After 1 Year Total rs. rs. rs. Rs. Rs. Rs.

25. non-interest BeArinG loAns AnD BorroWinGs

25.1 Group

Rent Deposits/Advances Payable – – – – 20,214,441 20,214,441

Other Payables 1,207,000 13,781,847 14,988,847 1,207,000 5,731,123 6,938,123

1,207,000 13,781,847 14,988,847 1,207,000 25,945,564 27,152,564



2009 2009 2008 2008 Amount Amount Amount Amount repayable repayable 2009 Repayable Repayable 2008 Within 1 Year After 1 Year total Within 1 Year After 1 Year Total rs. rs. rs. Rs. Rs. Rs.

26. interest BeArinG loAns AnD BorroWinGs

26.1 Group

Finance Leases 1,510,403 1,986,874 3,497,277 1,105,755 3,103,556 4,209,311

Bank Loans

- Rupee Loans (26.1.1) 299,346,753 1,340,834,492 1,640,181,245 70,654,800 96,151,112 166,805,912

- US$ Syndicate Loan (26.1.2) 398,180,814 360,502,534 758,683,348 371,613,589 708,062,942 1,079,676,531

Debentures (26.1.3) 9,090,909 6,818,182 15,909,091 9,090,909 15,909,091 25,000,000

Commercial Papers -

Nations Trust Bank PLC – – – 336,560,379 – 336,560,379

Trust Receipt Loan -

Standard Chartered Bank 243,716,260 – 243,716,260 227,716,260 – 227,716,260

Deutsche Bank 58,000,000 – 58,000,000 45,000,000 – 45,000,000

Bank Overdrafts 1,142,119,977 – 1,142,119,977 1,333,842,407 – 1,333,842,407

2,151,965,116 1,710,142,082 3,862,107,198 2,395,584,099 823,226,701 3,218,810,800

As at Loans As at 01.04.2008 Obtained Repayments 31.03.2009 Rs. Rs. Rs. rs.

26.1.1 rupee loans

Bank Loans 166,805,912 1,914,600,000 (441,224,667) 1,640,181,245

As at Loans As at 01.04.2008 Obtained Repayments Exchange Gain 31.03.2009 Rs. Rs. Rs. Rs. rs.

26.1.2 Us$ syndicate loan

Syndicate Loan 1,079,676,531 – (378,851,835) 57,858,652 758,683,348

rate of interest

a. In 2004 Heladanavi Ltd. (Joint Venture) entered into an interest rate SWAP Agreement with Hatton National Bank PLC, fixed

interest rate 5.15% plus 3% per annum for US$ 36.5 Mn (Group share - US$ 18.25 Mn).

b. Floating Interest Rate: Three months London Inter Bank Offer Rate (LIBOR) plus 3% per annum applicable for balance

US$ 2.5 Mn (Group share - US$ 1.25 Mn) - Interest payable quarterly during the grace period and thereafter monthly.

security

Immovable assets have been secured against US$ 4 Mn (Group share - US$ 2 Mn) loan and; movable assets, assignment of

book debts, all shares of the venture and project documents have been secured against balance US$ 35 Mn

(Group share - US$ 17.5 Mn) loan.

facility

The US$ 39 Mn (Group share - US$ 19.5 Mn) syndicated loan facility was obtained from Hatton National Bank PLC, Commercial

Bank of Ceylon PLC, Peoples’ Bank, Bank of Ceylon, Seylan Bank PLC, Sampath Bank PLC, DFCC Bank PLC to finance the

project and disbursements were made when it was requested by the Venture to make progress payments on the project.

terms of repayment

The capital repayment of the loan commenced from June 2005 after a grace period of 18 months from the date of the

first disbursement.



terms and conditions of Us$ syndicate loan

Undertaking not to declare dividends

According to the Syndicated Facility Agreement (SFA), venture has agreed and undertaken not to declare any dividend without

the prior consent of the lead bank during the grace period and thereafter.

Heladanavi has agreed and undertaken to maintain:

1. Long-term debt equity ratio below 2:1 from the second year of operation onwards.

2. Debt service coverage ratio be at least greater than one from the second year of operation.

3. Liquidity at 2:1 from the second year of operation onwards.

No payments can be made to an amount aggregating to more than US$ 100,000 (Group share - US$ 50,000) or its equivalent in

any currency per quarter other than project related payments and payments of dividends with the prior consent of the lead bank.

As at New As at 01.04.2008 Issues Redemption 31.03.2009 Rs. Rs. Rs. rs.

26.1.3 Debentures

15.75% Unsecured Subordinated Redeemable

Fixed Rate Debenture 25,000,000 – (9,090,909) 15,909,091

security

Heladanavi Ltd. (Joint venture) was not required by National Savings Bank to furnish any security for the Debentures issued by them.

terms of redemption

Grace period for the repayment of the loan is 18 months from the date of disbursement and equal capital repayments over

66 months thereafter.

the reason for the issue

These debentures were issued to finance the cost of the project and carry an interest of 15.75% per annum, payable

half-yearly in arrears.

2009 2009 2009 2008 2008 2008 Amount Amount Amount Amount repayable repayable Repayable Repayable Within 1 Year After 1 Year total Within 1 Year After 1 Year Total rs. rs. rs. Rs. Rs. Rs.

26.2 company

Loans from Related

Parties (26.2.1) 290,868,500 1,171,320,577 1,462,189,077 381,847,538 425,844,463 807,692,001

Bank Overdrafts 896,891 – 896,891 928,819 – 928,819

291,765,391 1,171,320,577 1,463,085,968 382,776,357 425,844,463 808,620,820



Loans Repayment/ As at Obtained Transfer As at 01.04.2008 During During 31.03.2009 the Year the Year Relationship Rs. Rs. Rs. rs.

26.2.1 loans from related parties

Hemas Marketing (Pvt) Ltd. Subsidiary 155,851,285 – (27,283,740) 128,567,545

Hemas Air Services (Pvt) Ltd. Subsidiary 64,568,597 121,600,200 (127,000,200) 59,168,597

Hemas Developments (Pvt) Ltd. Subsidiary 66,217,548 371,080,000 (323,380,000) 113,917,548

Hemas Manufacturing (Pvt) Ltd. Subsidiary 101,904,914 478,181,116 – 580,086,030

Peace Haven Resorts Ltd. Subsidiary 228,895,298 33,999,700 (6,700,000) 256,194,998

Vishwa BPO (Pvt) Ltd. Subsidiary 6,000,000 43,000,000 (41,000,000) 8,000,000

Forbes Air Services (Pvt) Ltd. Subsidiary 52,676,960 289,750,000 (157,750,000) 184,676,960

Hemtours (Pvt) Ltd. Subsidiary 130,619,995 – – 130,619,995

Hemas Travels (Pvt) Ltd. Subsidiary 957,404 – – 957,404

807,692,001 1,337,611,016 (525,363,940) 1,462,189,077

terms and conditions

1. Treasury Loans (Current)

Security - Unsecured

Repayment - Within 3 months

Interest - Based on market rates

2. Other Loans (Non-Current)

Security - Unsecured

Repayments - Grace Period of 3 Years (01/04/2007 - 31/03/2010) and thereafter repayable over 3 years

Interest - Grace Period of 3 Years (01/04/2007 - 31/03/2010) and thereafter interest chargeable based on Market Rates

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

27. DeferreD income tAx

27.1 Deferred tax Assets

Balance as at Beginning of the Year 18,482,425 – – –

Income/(Expense) arising during the Year 3,349,703 18,482,425 – –

Balance at the End of the Year 21,832,128 18,482,425 – –

27.2 DeferreD tAx liABilities

Balance as at Beginning of the Year 139,563,588 171,032,817 37,047,574 51,882,237

Provision/(Release) made during the Year

- Directly to Income Statement (7,546,598) (10,109,346) 1,932,184 (14,834,663)

- Directly to Equity 4,290,736 (8,597,819) – –

- Adjustment in respect of prior Year – (12,762,064) – –

Balance at the End of the Year 136,307,726 139,563,588 38,979,758 37,047,574



Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

28. retirement Benefit liABilitY

Retirement Benefit Obligation - Gratuity

Balance as at Beginning of the Year 145,535,317 120,831,293 13,276,545 11,381,592

Charge for the Year 22,914,881 42,106,220 (347,375) 6,491,426

Transfers during the year 7,184,397 – 6,315,995 –

Payments during the Year (34,877,711) (17,402,196) (137,037) (4,596,473)

Balance as at the End of the Year 140,756,884 145,535,317 19,108,128 13,276,545

28.1 Messrs Actuarial & Management Consultants (Pvt) Ltd. Actuaries, carried out an actuarial valuation of the defined benefit

plan gratuity on 31/03/2009. Appropriate and compatible assumptions were used in determining the cost of retirement benefits.

The principal assumptions used are as follows:

Discount rate assumed (%) 12%

Further salary increase (%) 10%

Retirement age 50-60 Years

Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

29. provisions

Provision for Delay Interest under EPC/O&M Contracts – 4,703,892 – –

Provision for Delay Interest on Purchase of Fuel 10,586,961 11,350,000 – –

Provision for Excess Energy and Others 1,745,548 5,446,399 – –

12,332,509 21,500,291 – –

30. trADe AnD otHer pAYABles

Trade Payables

Related Parties (30.1) – – 777,204 1,472,042

Others 1,880,580,278 1,933,966,526 830,698 149,379

Other Payables

Related Parties (30.2) – – 5,874,906 27,587,872

Others 223,978,943 199,011,774 20,642,401 24,961,529

Sundry Creditors including Accrued Expenses 649,417,847 386,031,251 16,796,052 16,101,490

2,753,977,068 2,519,009,551 44,921,262 70,272,312



Group company


30.1 trade Dues to related parties


(Pvt) Ltd. Subsidiary – – – 77,856

Hemas Travels (Pvt) Ltd. Subsidiary – – 56,900 76,082

Hemas Development (Pvt) Ltd. Subsidiary – – – 42,500

Hemas Marketing (Pvt) Ltd. Subsidiary – – 444,304 444,304

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 16,800 16,800

Hemtours (Pvt) Ltd. Subsidiary – – 259,200 364,500

Vishwa BPO (Pvt) Ltd. Subsidiary – – – 450,000

– – 777,204 1,472,042

30.2 non-trade Dues to related parties


(Pvt) Ltd. Subsidiary – – 1,684,553 22,138

Peace Haven Resorts Ltd. Subsidiary – – 2,812,500 2,812,500

Forbes Air Services (Pvt) Ltd. Subsidiary – – – 23,487,359

Hemas Marketing (Pvt) Ltd. Subsidiary – – – 39,373

ACX International (Pvt) Ltd. Subsidiary – – – 22,437

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 186,571 102,255

Hemtours (Pvt) Ltd. Subsidiary – – 251,230 1,100,810

Hemas International Freight (Pvt) Ltd. Joint Venture – – – 1,000

Vishwa BPO (Pvt) Ltd. Subsidiary – – 401,863 –

Diethelm Travels (Pvt) Ltd Subsidiary – – 153,089 –

Hemas Travels (Pvt) Ltd. Subsidiary – – 385,100 –

– – 5,874,906 27,587,872

31. AmoUnts DUe to relAteD pArties

Peace Haven Resorts Ltd. Subsidiary – – 4,885,024 1,702,082


Spectrum Marketing (Pvt) Ltd. Subsidiary – – – 6,008

Hemas Hospitals (Pvt) Ltd. Subsidiary – – – 793,557

Vishwa BPO (Pvt) Ltd. Subsidiary – – 3,263,047 –

Hemas Manufacturing (Pvt) Ltd. Subsidiary – – 5,457,475 –

Hemas Pharmaceuticals (Pvt) Ltd. Subsidiary – – 10,000 –

Hemtours (Pvt) Ltd. Subsidiary – – 7,745,000 –

Hemas Aviation (Pvt) Ltd. Subsidiary – – 5,400,000 –

Exchange & Finance Investment Ltd. Subsidiary – – 3,755,318 –

Discover the World Marketing

(Pvt) Ltd. Subsidiary – – 3,320,001 –

Hemas Air Services (Pvt) Ltd. Subsidiary – – 384,973 –

Hemas Travels (Pvt) Ltd. Subsidiary – – 1,775,881 –

Forbes Air Services (Pvt) Ltd. Subsidiary – – 3,899,455 –

Hemas Developments (Pvt) Ltd. Subsidiary – – 1,333,939 –

ACX International (Pvt) Ltd. Subsidiary – – 6,376,325 –


– – 61,473,505 4,366,647



Group company

2009 2008 2009 2008 rs. Rs. rs. Rs.

32. cAsH AnD cAsH eQUivAlents in cAsH floW stAtement

components of cash and cash equivalents

32.1 favourable cash and cash equivalent Balances

Cash & Bank Balances 485,126,578 567,512,348 10,186,344 16,446,618

Fixed Deposits, Treasury Bills and Repo Investments 602,497,060 631,461,389 12,520,944 1,308,473 32.2 Unfavourable cash and cash equivalent

Balances 1,087,623,638 1,198,973,737 22,707,288 17,755,091

Bank Overdraft (Note: 26.1/26.2) (1,142,119,977) (1,333,842,407) (896,891) (928,819)

total cash and cash equivalents for the

purpose of cash flow statement (54,496,339) (134,868,670) 21,810,397 16,826,272

33. AcQUisition of sUBsiDiAries AnD AssociAte DUrinG tHe YeAr - GroUp

the acquisitions and disposals had the following effects on the Group’s Assets & liabilities

a. okanda power Grid (pvt) ltd. (2008).

2009 2008 rs. Rs.

Assets

Property, Plant and Equipment – 2,177,600

Goodwill Acquired – 20,435,109

Purchase Consideration – 22,612,709

b. Hemas Hospitals (pvt) limited (7,607,086) 194,921,361

Total Cash Consideration (7,607,086) 217,534,070

Proceeds from Disposal of Subsidiary - Hemans International Freight (Pvt) Ltd./

(Associate 2008) (17,024,700) (103,029,381)

net cash out flows (24,631,786) 114,504,689

34. events occUrrinG After tHe BAlAnce sHeet DAte

There have been no material events occurring subsequent to the balance sheet date, that require adjustment to or disclosure in

the financial statements.

35. commitments AnD continGencies

35.1 capital expenditure commitments

The Company and the Group do not have significant capital commitments as at the Balance Sheet date.



35.2 contingencies

a. Hemas Holdings plc

The contingent liability as at 31st March 2009 on guarantees given by Hemas Holdings PLC., to banks on behalf of subsidiaries &

joint venture relating to facilities obtained, are as follows: 2009 2008 rs. Rs.

Hemas Pharmaceuticals (Pvt) Ltd. 88,750,000 88,750,000

Hemas Travels (Pvt) Ltd. 14,000,000 14,000,000

Hemas Corporate Services (Pvt) Ltd. 5,000,000 5,000,000

Hemas Southern Hospitals (Pvt) Ltd, 110,000,000 110,000,000

Heladhanavi Ltd. 300,000,000 –

Exchange & Finance Investments Ltd. 2,500,000 2,500,000

Giddawa Hydro Power (Pvt) Ltd. – 132,000,000

Hemas Manufacturing (Pvt) Ltd. 85,000,000 –

605,250,000 352,250,000

b. Hemas manufacturing (pvt) ltd.

A Civil Case has been filed against the Company by Colgate Palmolive Company, seeking a declaration that the Company’s

Registered Trade Mark No. 74941 is null and void and of no force of effect in law from the date of registration of the said mark.

Both parties have filed written submissions as per the Supreme Court rules and the Supreme Court Registry will notify the date of

hearing in due course

c. Hemas marketing (pvt) ltd.

The Company has given guarantees to Banks on behalf of Hemas Manufacturing (Pvt) Ltd. amounting to Rs. 150 Mn.

d. Hemas travels (pvt) ltd.

1. The Company has obtained guarantees from Standard Chartered Bank favouring Airline Operators amounting to

Rs. 169,300,000/-.

2. The Company has obtained guarantees from Standard Chartered Bank favouring ‘Gullivers Travels’ and Saltours

International, Mumbai amounting to GBP 10,000/- and EURO 10,000 respectively.

3. The Company has obtained guarantees from Standard Chartered Bank favouring Central Bank of Sri Lanka amounting to

Rs. 2,500,000/-.

4. The Company has obtained guarantees from Standard Chartered Bank favouring The Commissioner General of Inland

Revenue and Sri Lanka Tourist Board amounting to Rs. 202,700/- and Rs.60,000/- respectively.

e. Hemas Air services (pvt) ltd.

1. The Company has obtained guarantees from Standard Chartered Bank favouring Airport & Aviation Services (Pvt) Ltd.

and Malaysian Airlines amounting to Rs. 5,201,450/- and US$ 200,000/- respectively.

2. The Company has obtained guarantees from Standard Chartered Bank on behalf of Hemas Aviation (Pvt) Ltd., favouring

Island Aviation Services, Sri Lankan Airline Ltd. and Drukair Corporation Ltd., amounting to Rs. 1,000,000 , US$ 30,000

and US$ 20,000 respectively.

3. The Company has obtained guarantee from Standard Chartered Bank favouring Commissioner General of Inland

Revenue amounting to Rs. 199,300/-



f. forbes Air services (pvt) ltd.

1. The Company has obtained guarantees from Standard Chartered Bank favouring Emirates - Dubai amounting to

Rs. 785,000,000/-.

2. The Company has obtained a guarantee from Standard Chartered Bank favouring Airport & Aviation Services amounting

to Rs. 141,538/-.

3. The Company has obtained a guarantee from Standard Chartered Bank favouring The Commissioner General of Inland

Revenue amounting to Rs. 460,100/-.

g. Hemas international freight (pvt) ltd.

1. The Company has obtained a guarantee from Standard Chartered Bank favouring Sri Lankan Airlines amounting to

Rs. 2,000,000/-.

2. The Company has obtained a guarantee from Standard Chartered Bank favouring Green Lanka Shipping Ltd. amounting to

Rs. 4,000,000/-.

3. The Company has obtained a guarantee from Standard Chartered Bank favouring Atiken Spence Aviation (Pvt) Ltd.

amounting to Rs. 2,000,000/-.

4. The Company has obtained a guarantee from Standard Chartered Bank favouring MAC Holdings (Pvt) Ltd. amounting to

Rs. 1,000,000/-.

5. The Company has obtained a guarantee from Standard Chartered Bank favouring The Commissioner General of Inland

Revenue amounting to Rs. 1,423,400/- and on behalf of Hellman Worldwide Logistics (Pvt) Ltd. amounting to

Rs. 163,700/-.

6. The Company has obtained guarantees from Standard Chartered Bank favouring Cathay Pacific Airways Ltd., Delmege

Forsyth Tours (Pvt) Ltd., Airport & Aviation Services, South Asian Travels Ltd. and The Director General of Customs,

amounting to Rs. 500,000/- , Rs. 500,000/-, Rs. 284,625/-, Rs. 250,000/- and Rs. 50,000/- respectively.

h. exchange & finance investments ltd.

1. The Company has obtained guarantees from Nations Trust Bank PLC favouring Kenya Airways amounting to Rs.

4,000,000/-.

2. Mr. K.T.D Samarasinghe has filed a case against the Company claiming damages for Rs. 5 Mn and the trial is still being

continued. However no provision has been made in the accounts in this regard.

i. Hemas Aviation (pvt) ltd.

1. The Company has obtained a guarantee from Standard Chartered Bank favouring RAK Airways amounting to US$ 25,000.

2. The Company has obtained guarantees from Standard Chartered Bank through Hemas Air Services (Pvt) Ltd., favouring

Island Aviation Services, Sri Lankan Airline Ltd. and Drukair Corporation Ltd., amounting to Rs. 1,000,000/-, US$ 30,000

and US$ 20,000 respectively.

j. Acx international (pvt) ltd.

The Company has obtained a bank guarantee on behalf of International Bonded Couries amounting to HKD 30,000.



k. Discover the World marketing (pvt) ltd.

The Company has given a guarantee amounting to US$ 50,000 to its principal “Discover Momentum” in relation to the credit

facilities obtained by the principal.

l. far shipping lanka (pvt) ltd.

The Company has obtained guarantees from Standard Chartered Bank favouring Sri Lanka Port Authority, Merchant

Shipping and The Commissioner General of Inland Revenue., amounting to Rs. 500,000/-, Rs. 500,000/- and Rs. 442,850/-.

respectively.

m. Hemtours (pvt) ltd.

The Company has filed cases against Mr. Irosh Fernando and UVI Holidays for the purpose of recovering the receivables due

from them.

35.3 lease commitments

a. Hemas Hospitals (pvt) ltd.

operating lease commitments - company as lessee

The Company has entered into an operating lease agreement to lease a land from Nihila Garments (Pvt) Ltd . This lease has a life of

30 years with no renewal option included in the contract. There are no restrictions placed upon the lessee by entering into this lease.

2009 2008 rs. Rs.

Future minimum rentals payable under operating lease as at 31 March are as follows:

Within 01 year 47,068,140 15,000,000

After 01 year but not more than 05 years 81,750,000 78,000,000

More than 05 years 542,244,000 564,744,000

671,062,140 657,744,000

35.4 commitments and contingencies of the Jointly controlled entity

Heladhanavi ltd. - The Group has 50% share of following;

operations and maintenance Agreement with lakdhanavi ltd.

According to this agreement, the fixed fee payable after the final completion date is US$ 625,000 per annum paid in equal

monthly instalments.

Heladhanavi is liable to pay Lakdhanavi an additional sum of US $ 2,000,000 for each remaining year of the term or pro rata for

part of term upon the early termination of this agreement. A variable fee, depends on the Net Energy output generated.

fuel transport Agreement with ltl projects (pvt) ltd

Heladhanavi has entered into a contract during the period with LTL Projects (Pvt) Ltd., for the transportation of fuel. According to

the arrangement the company need to pay a fixed charge of US$ 10,500 per month from the date of commencement of power

generation in the plant.

fuel supply Agreement with ceylon petroleum corporation

If the company is unable to accept fuel under supply schedule (subject to change) and/or comply with its obligations under this

agreement and costs, expenses, damages and losses incurred as a direct and exclusive result of such failure or inability should

be paid by the company within 30 days. However, company’s liability under this agreement is limited to a maximum of US$

500,000 per annum.

According to the clause 3.5 (C) of fuel supply agreement, company has established a Letter of Credit at Hatton National Bank PLC

in favour of Ceylon Petroleum Corporation to the value of Rs. 280,000,000/-.



power purchase Agreement with ceylon electricity Board

If the company fails to supply Minimum guaranteed Energy Amount (MGEA), which is 698,417,280 kWh per year, the Company

would be liable for liquidated damages.

shortfall Amount of liquidated damages for each kwh of shortfall

Exceeding 10% of MGEA up to 25% of MGEA 15% of capacity charges Exceeding 25% of MGEA 25% of capacity charges

36. Assets pleDGeD

The following assets have been pledged as security for liabilities as at the Balance Sheet date.

name of the company nature of Assets nature of liability carrying Amount included of the Assets Under pledged 2009 2008 rs. Rs.

Hemas Manufacturing Inventories and Concurrent 22,500,000/- 22,500,000/- Inventories (Pvt) Ltd. Trade Receivables Mortgage to and Trade the extent of Receivable bank facility obtained from HNB & HSBC

Land & Building of Primary mortgage for 788,280,121/- – Property, Dankotuwa state the Bank loan obtained Plant and Existing machinery from NDB Equipment Proposed Plant & Machinery, Equipment and Furniture & Fittings of Dankotuwa state.

Heladhanavi Ltd. Immovable Assets US$ 4,000,000 10,884,270/- 10,884,270/- Property, (The Group has 50% share (Syndicated Plant and of the Assets Pledged) Loan Facility) Equipment

Mortgage of all 8,133,820,730/- 8,090,961,137/- Property, movable assets and Plant and assignment of book Equipment debts of the Company. US$ 35,000,000 1,200,000,070/- 1,200,000,070/- Stated Share certificates of (Syndicated Loan Facility) Capital the Company.

Assignment of project documents.

Immovable Assets. Rs. 30,769,230/- 10,884,270/- 10,884,270/- Property, (Rupee Loan Facility) Plant and Equipment

Mortgage of all Rs. 269,230,769/- 8,133,820,730/- 8,090,961,137/- Property, movable assets and (Rupee Loan Facility) Plant and assignment of Equipment book debts of the Company.

Share certificates of Rs. 400,000,000/- 1,200,000,070/- 1,200,000,070/- Stated the Company. (Working Capital Loan) Capital

Assignment of project

documents.

}}




Serendib Hotels PLC Leasehold Land Primary Mortgage 219,848,875/- 226,131,255/- Leasehold

and Buildings up to the value of Property

Rs. 48,000,000/- to and Property,

Seylan Bank Plant and

Equipment

Secondary

Mortage up to the

value of Rs. 20,000,000/-

to Seylan Bank

Additional Mortgage up to

the value of Rs. 1,889,000/-

to Seylan Bank

Stafford Hotels PLC Freehold Land Primary Mortgage 439,517,122/- 439,048,817/- Property,

and Buildings upto the value of Plant and

Rs. 55 Mn to DFCC bank. Equipment

Plant, Machinery, Primary Mortgage 84,123,783/- 83,565,586/- Property,

and Equipment over existing Plant and

movable items up Equipment

to the value of

Rs. 5,000,000/- to DFCC

Freehold Land Secondary Mortgage – 439,048,817/- Property,

and Buildings up to value of Plant and

Rs. 3,750,000/- to DFCC Equipment

Miami Beach Hotels Ltd. Freehold Land Primary Mortgage 180,829,678/- 180,297,290/- Property

and Buildings up to the value of Plant and

Rs. 65,000,000/- to Equipment

Seylan Bank

Freehold Land Secondary Mortgage 180,829,678/- 180,297,290/- Property,

and Buildings up to value of Plant and

Rs. 15,000,000/- to DFCC Equipment

Plant, Machinery, Primary mortgage 58,995,449/- 57,799,274/- Property,

and Equipment over existing Plant and

movable items up to Equipment

the value of Rs. 5 Mn

to DFCC

Freehold Land Tertiary mortgage – 180,297,290/- Property,

and Buildings up to the value Plant and

of Rs. 1,250,000/- Equipment

to DFCC Bank




Hotel Sigiriya Ltd. Leasehold Land Primary Mortgage 113,619,097/- 113,832,864/- Property,

& Buildings up to the value of Plant and


Commercial Bank of

Ceylon PLC

Plant, Machinery, Primary mortgage 3,393,894/- – Property,

& Equipment up to the value of Plant and


Commercial Bank of

Ceylon PLC

Hemas Hospitals Leasehold right Primary Mortgage 957,391,095/- 50,045,580/- Property,

(Pvt) Ltd. to the Leasehold Land up to the value of Plant and


DFCC Bank

Hemas Southern Land & Building Concurrent mortgage 258,700,000/- – Property,

Hospitals (Pvt) Ltd. to the extent of Bank Plant and

facility obtained Equipment

from Sampath Bank

37. relAteD pArtY DisclosUres

Details of significant related party disclosures are as follows:

subsidiaries others total 2009 2008 2009 2008 2009 2008 rs. Rs. rs. Rs. rs. Rs.

37.1 transaction with related entities

nature of transaction

Management Fees Receivable – 12,500,000 – – – 12,500,000

Consultancy Fees Receivable 260,017,659 137,958,571 – – 260,017,659 137,958,571

Bank Guarantee Fees Receivable 2,358,752 1,585,625 – – 2,358,752 1,585,625

IT Charges Receivable 64,863,417 59,227,555 – – 64,863,417 59,227,555

Rent Receivable 883,514 5,301,083 – – 883,514 5,301,083

Loan Interest Income Receivable 30,137,808 24,569,767 – – 30,137,808 24,569,767

Dividend Income Receivable 141,156,406 157,137,674 – – 141,156,406 157,137,674

Treasury Loans Granted (755,506,791) (709,633,200) – – (755,506,791) (709,633,200)

Loan Interest Income Payable (126,933,223) (42,176,110) – – (126,933,223) (42,176,110)

Receipt of Services (6,652,716) (4,855,106) – – (6,652,716) (4,855,106)

Shared Service Fee Payable (6,398,279) (3,228,444) – – (6,398,279) (3,228,444)

Purchase of Air Ticket (6,135,069) (4,361,914) – – (6,135,069) (4,361,914)

Treasury Loans Obtained 416,345,047 605,418,447 – – 416,345,047 605,418,447

Repayment of Loans (Net) 600,866,529 152,258,543 – – 600,866,529 152,258,543

615,003,054 391,702,491 – – 615,003,054 391,702,491



off Balance sheet items

Guarantees given by the Company to banks on behalf of related parties are disclosed in Note 35.2 to these financial statements.

terms and conditions:

- Sales and purchase of goods and/or services to related parties were made at on the basis of the price lists in force with

non-related parties, but subject to approved discounts. Fees relating to rendering of services were made at agreed prices.

Settlement will take place in cash.

- Terms and Conditions on loans obtained from related parties are disclosed in Note 25 and 26 to these financial statements.

37.2 transactions with Key management personnel

The Key Management Personnel are the members of its Board of Directors of Hemas Holdings PLC.

2009 2008 rs. Rs.

a. Key management personnel compensation

Directors’ Fees 4,564,318 3,805,000

Emoluments 32,749,800 36,552,438

Non Cash Benefits 3,078,777 2,978,893

40,392,895 43,336,331

b. transactions, Arrangements and Agreements involving Key management personnel

Purchase of Air Tickets 405,500 9,626,254

405,500 9,626,254

No other significant transactions had taken place involving Key Management Personnel and their Close Family Members.



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2009

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rs.

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39. proportionAte interest in Joint ventUres

The Group’s proportionate share of Heladhanavi Ltd. (50%), Hemas International Freight (Pvt) Ltd. (49%), Skynet Worldwide

Express (Pvt) Ltd. (49%) and Hellmann Worldwide Logistics (Pvt) Ltd. (49%), Income and Expenses, Assets and Liabilities have

been included in the Group Income Statement and Balance Sheet respectively.

The aggregate amounts so included are as follows:

Group

2009 2008 rs. Rs.

a. Current Assets 1,480,626,659 1,598,400,686

b. Non-Current Assets 2,057,623,329 2,250,133,737

c. Current Liabilities 1,677,318,107 1,671,943,597

d. Non-Current Liabilities 379,602,718 777,747,786

e. Income 5,226,276,246 5,291,987,769

f. Net Profit 199,699,277 271,089,808

40. GroUp compAnies proportion of ownership voting Ownership Voting interest power Interest Power principal as at as at as at as at Activities 31.03.2009 31.03.2009 31.03.2008 31.03.2008 % % % %

subsidiaries

Hemas Travels (Pvt) Ltd. 100 100 100 100 Travel Agent

Hemas Manufacturing (Pvt) Ltd. 100 100 100 100 Manufacture of FMCG Products

Hemas Air Services (Pvt) Ltd. 100 100 100 100 GSA Malaysian Airline

Forbes Air Services (Pvt) Ltd. 100 100 100 100 GSA Emirates Airline

Hemas Aviation (Pvt) Ltd. 100 100 100 100 Airline Presentation

Go Asia Air Lines (Pvt) Ltd. 100 100 100 100 Airline Presentation

Exchange & Finance Investment (Pvt) Ltd. 100 100 100 100 Airline Presentation

Discover the World Marketing (Pvt) Ltd 100 100 100 100 Airline Presentation

Hemas Surgical & Diagnostics (Pvt) Ltd. 100 100 100 100 Distribution of Healthcare Products

Hemas Foods (Pvt) Ltd. 100 100 100 100 Import and sale of Food Products

Hemas Corporate Services (Pvt) Ltd. 100 100 100 100 Corporate Secretaries

Leisure Asia Investments Ltd 100 100 100 100 Investment Holding Company

Serendib Hotels PLC (Group) 51 51 51 51 Leisure Investments

Hemas Power (Pvt) Ltd. 100 100 100 100 Venture Capital Company

Hemtours (Pvt) Ltd. 100 100 100 100 Destination Management Services

Hemas Developments (Pvt) Ltd. 100 100 100 100 Property Development

Conventions Asia (Pvt) Ltd. 100 100 100 100 Event Management

Peace Haven Resorts Ltd. 95 95 95 95 Hotel Property

Hemas Marketing (Pvt) Ltd. 100 100 100 100 Trading & Distribution

of FMCG Products

Spectrum Marketing (Pvt) Ltd 100 100 100 100 Dormant

Hemas Pharmaceuticals (Pvt) Ltd. 100 100 100 100 Distribution of Pharmaceutical

Products

ACX International (Pvt) Ltd. 100 100 100 100 Courier Services

Hemas Clinical Research Services (Pvt) Ltd. 100 100 100 100 Support Services of

(Formerly known as Clinical Solutions (Pvt) Ltd.) Clinical Trials

Vishwa BPO (Pvt) Ltd 100 100 100 100 Financial & Accounting BPO

Giddawa Hydro Power (Pvt) Ltd. 100 100 100 100 Mini Hydro Power Plant

Okanda Power Grid (Pvt) Ltd. 100 100 100 100 Mini Hydro Power Plant

(under construction)



40. GroUp compAnies (contd...) proportion of ownership voting Ownership Voting interest power Interest Power principal as at as at as at as at Activities 31.03.2009 31.03.2009 31.03.2008 31.03.2008 % % % %

subsidiaries

Mowbray Hotels Ltd. 89 89 89 89 Hotel Property

Far Shipping Lanka (Pvt) Ltd. 100 100 100 100 Shipping Agents

Hemas Transportation (Pvt) Ltd. (Formerly

known as Hemas Shipping (Pvt) Ltd.) 100 100 100 100 Shipping Agents

Hemas Hospitals (Pvt) Ltd. 65 65 49.7 49.7 Healthcare Services

Hemas Southern Hospitals (Pvt) Ltd. 65 65 49.7 49.7 Healthcare Services

Hemas International Freight (Pvt) Ltd. – – 100 100 Freight Forwarders

N-Able (Pvt) Ltd. 100 100 – – Enabling Information

& Technology Solutions

Diethelm Travel Lanka (Pvt) Ltd. 80 80 – – Destination Management Services

Jointly controlled entity

Heladhanavi Ltd. 50 50 50 50 Thermal Power Plant

Hellman Worldwide Logistics (Pvt) Ltd 49 49 49 49 Freight Forwarders

Hemas International Freight (Pvt) Ltd. 49 49 – – Freight Forwarders

Sky Net Worldwide Express (Pvt) Ltd. 49 49 – – Courier Services



share information

ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS AT 31 MARCH 2009

Resident Non-Resident Total

Shareholdings No. of No. of Percentage No. of No. of Percentage No. of No. of Percentage Shareholders Shares (%) Shareholders Shares (%) Shareholders Shares (%)

1 to 1000 Shares 3,302 665,555 0.65 23 7,440 0.01 3,325 672,995 0.66

1001 to 5,000 Shares 323 700,422 0.69 10 22,150 0.02 333 722,572 0.71

5,001 to 10,000 Shares 49 353,597 0.35 5 34,625 0.03 54 388,222 0.38

10,001 to 50,000 Shares 61 1,268,295 1.24 4 167,800 0.16 65 1,436,095 1.40

50,001 to 100,000 Shares 12 827,512 0.81 – – 0.00 12 827,512 0.81

100,001 to 500,000 Shares 16 3,644,247 3.57 3 725,100 0.71 19 4,369,347 4.28

500,001 to 1000,000 Shares 2 1,572,750 1.54 – – – 2 1,572,750 1.54

Over 1,000,000 Shares 11 8,292,1581 81.35 2 9,047,050 8.87 13 91,968,631 90.22

3,776 91,953,959 90.20 47 10,004,165 9.80 3,823 101,958,124 100.00

Categories of Shareholders No. of Shareholders No. of Shares

Individual 3,577 7,375,254

Institutional 246 94,582,870

3,823 101,958,124

COMpUTATION OF pUBLIC SHAREHOLDING

As at 31 March 2009 2008 No. of Shares No. of Shares

Over 10% holding

A Z Holdings (Pvt) Ltd. 18,152,575 18,152,575

Saraz Investments (Pvt) Ltd. 17,279,207 17,279,207

Blueberry Investments (Pvt) Ltd. 17,156,250 17,156,250

Amagroup (Pvt) Ltd. 17,156,133 17,156,133

DIRECTORS SHAREHOLDING

Mr. A.N. Esufally 398,417 398,417

Mr. H.N. Esufally 1,209,041 1,209,041

Mr. I.A.H. Esufally 1,226,500 1,226,500

Mr. M.A.H. Esufally 1,131,000 1,131,000

Mr. L. De Mel 17,500 17,500

Mr. D. Bhatnagar 30 30

Mr. M.E. Wickremasinghe 2,250 2,250

Mr. S.J. Scarff – –

Mr. P.K. Mohapatra – –

73,728,903 73,728,903

Issued Share Capital 101,958,124 101,308,124

Less:Directors Shareholding and shareholders over 10% 73,728,903 73,728,903

Public Holding 28,229,221 27,579,221

Public Holding as a % of Issued Share Capital 27.69% 27.22%


SHARE TRADING

2008/09 2007/08

Market price

Highest (Rs.) 92.25 (04.04.08) 120.00 (16.04.07)

Lowest (Rs.) 55.00 (24.12.08) 87.00 (31.03.08)

As at year ended (Rs.) 60.25 (31.03.09) 87.50 (31.03.08)

No. of Trades 1,295 915

No. of Shares Traded 3,834,000 1,594,400

Value of the Shares Traded - (Rs.) 276,707,350 158,574,675

Market Capitalisation (Rs. Bn) 6,142,977 (31.03.09) 8,864,461 (31.03.08)

MAjOR SHAREHOLDERS

LIST OF 20 MAjOR SHAREHOLDERS AS AT 31ST MARCH

2009 2008 No. of Shares % No. of Shares %

1. A Z Holdings (Pvt) Ltd. 18,152,575 17.8 18,152,575 17.9

2. Saraz Investments (Pvt) Ltd. 17,279,207 16.9 17,279,207 17.1

3. Bluberry Investments (Pvt) Ltd. 17,156,250 16.8 17,156,250 16.9

4. Amagroup (Pvt) Limited 17,156,133 16.8 17,156,133 16.9

5. HSBC INTL NOM Ltd. - Arisaig India Fund Ltd. 8,042,050 7.9 8,042,050 7.9

6. Employees Provident Fund 4,061,175 4.0 3,665,975 3.6

7. Sri Lanka Insurance Corporation Ltd. - Life Fund 3,008,800 3.0 1,749,100 1.7

8. Akbar Brothers Ltd. 1,340,900 1.3 1,090,900 1.1

9. Mr. I.A.H. Esufally 1,226,500 1.2 1,226,500 1.2

10. Mr. H.N. Esufally 1,209,041 1.2 1,209,041 1.2

11. National Savings Bank 1,200,000 1.2 1,200,000 1.2

12. Mr. M.A.H. Esufally 1,131,000 1.1 1,131,000 1.1

13. HSBC Intl. Nominees Ltd. - HSBC Bank PLC -

CMG First State Global Umbrella Fund PLC 1,005,000 1.0 1,005,000 1.0

14. Jacey Trust Services (Pvt) Ltd. 922,750 0.9 922,750 0.9

15. Jacey Trust Services (Pvt) Ltd. - Account No. 2 650,000 0.6

16. Employees Trust Fund Board 485,900 0.5

17. Cocoshell Activated Carbon Company Ltd. 433,775 0.4 407,275 0.4

18. Mr. A.N. Esufally 398,417 0.4 398,417 0.4

19. M.J.F. Exports Ltd. 341,000 0.3 341,000 0.3

20. CB London S/A The RBS As DEP of FS India

Sub/Cont FD As S/F of First State Invest ICVC 327,000 0.3

95,527,473 93.6 92,133,173 90.8

Shares held by the balance shareholders 6,430,651 6.4 9,174,951 9.2

Total Issued Shares 101,958,124 100.0 101,308,124 100.0

pUBLIC HOLDING

As at 31.03.09 As at 31.03.08

Public Holding as a % of issued Share Capital 27.69% 27.22%

share information


five year summary

Year Ended 31st March 2009 2008 2007 2006 2005 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Restated Restated

Operating Results

Group Revenue 15,342,278 14,163,805 11,778,136 9,779,338 9,275,784

Profit Before Taxation 856,932 1,259,455 1,407,185 1,247,374 1,057,678

Taxation 137,854 108,625 387,648 281,838 225,143

Profit After Taxation 719,078 1,150,830 1,019,537 965,536 832,535

Profit Attributable to Hemas Group 775,128 1,135,419 1,005,727 958,599 836,973

Equity & Liabilities

Stated and Preference Shares 1,410,889 1,387,345 1,404,018 1,277,195 1,235,186

Reserves 764,635 783,413 635,444 590,584 661,391

Retained Earnings 4,852,766 4,262,939 3,234,682 2,451,308 1,745,396

Minority Interest 837,062 604,967 588,527 496,967 681,897

Non-Current Liabilities 2,013,321 1,155,771 1,597,455 1,922,112 2,182,320

Current Liabilities 4,957,139 4,936,190 3,935,734 3,286,596 3,145,779

14,835,812 13,130,625 11,395,855 10,024,762 9,651,969

Assets

Property, Plant and Equipment 7,180,680 5,182,389 4,704,921 4,664,939 5,333,306

Investment Property 1,178,710 1,178,710 963,710 570,152 –

Leasehold Property 64,911 67,976 71,042 75,346 –

Intangible Assets 191,214 173,622 155,563 107,268 40,336

Investments (Associate & Others) 124,177 278,559 66,751 138,082 233,259

Deferred Tax Assets 21,832 18,482 – – –

Current Assets 6,074,288 6,230,887 5,433,868 4,468,975 4,045,068

14,835,812 13,130,625 11,395,855 10,024,762 9,651,969

Key Indicators

Earnings Per Share (Rs.) 7.57 11.13 9.90 9.52 8.43

Dividends Per Share (Rs.) 1.25 1.25 2.5 2.5 3.0

Dividend Cover (No. of Times) 6.1 8.9 4.0 4.0 3.5

Interest Cover (No. of Times) 2.8 4.6 6.1 5.4 7.8

Net Asset Per Share (Rs.) 68.90 63.50 52.30 42.50 46.00

Cash from Operating Activities (Rs. ’000) 1,458,434 929,277 176,992 1,035,785 1,182,366

Current Ratio (No. of Times) 1.2 1.3 1.4 1.4 1.3

Gearing (%) 32.9 31.4 33.0 36.1 40.3

ROE (%) 11.5 19.4 21.0 24.1 25.7


CApITAL EMpLOYED

Total shareholders’ funds plus debt and

minority interest.

CApITAL RESERVES

Reserves identified for specific purposes

and considered not available for

distribution.

CURRENT RATIO

Current assets divided by current

liabilities.

CONTINGENT LIABILITIES

Conditions or situations at the Balance

Sheet date, the financial effect of which

are to be determined by future events

which may or may not occur.

DEBT

Interest bearing long-term loans plus

short-term loans and overdrafts.

DEFERRED INCOME TAX

The net tax effect on items which have

been included in the Income Statement,

which would only qualify for inclusion on

a tax return at a future date.

DIVIDEND COVER

Net profit attributable to the ordinary

shareholders divided by the total

dividend paid and proposed.

EARNINGS

Profit after tax less minority interest.

EARNINGS pER SHARE

Profit attributable to ordinary

shareholders divided by the weighted

average number of ordinary shares in

issue during the year.

EBIT

Earnings before interest and tax.

EBITDA

Earnings before interest, depreciation

and amortisation.

EFFECTIVE RATE OF TAXATION

Income tax over profit before tax.

EQUITY

Total shareholders’ funds.

GEARING

Debt divided by the sum of equity and

minority interest and debt.

INTEREST COVER

Operating profit before interest and tax

divided by the total finance cost.

MARKET CApITALISATION

The number of ordinary shares in issue

multiplied by the market price per share

as at the reported date.

MINORITY INTEREST

Part of the net results of operations and

of net assets of a subsidiary attributable

to interests which are not owned, directly

or indirectly, through Subsidiaries, by the

Parent.

NET ASSETS pER SHARE

Shareholders funds divided by the

number of ordinary shares in issue as at

the end of the year.

pRICE EARNINGS RATIO

Market price per share divided by the

earnings per share.

RETURN ON EQUITY

Profit after tax, minority interest and

extraordinary items divided by average

shareholders’ funds at the beginning and

end of the year.

REVENUE RESERVES

Reserves set aside for future

distributions and Investments.

RETURN ON CApITAL EMpLOYED

Earnings before tax divided by average

capital employed.

SEGMENT

Constituent business units grouped in

terms of similarity of operations and

strategy.

Glossary


NOTICE IS HEREBY GIVEN that the Sixth Annual

General Meeting of Hemas Holdings PLC will be held at

the Auditorium of the Ceylon Chamber of Commerce,

No. 50, Nawam Mawatha, Colombo 2 on Friday the 26th

day of June 2009 at 3.00 p.m. for the following purposes:

AGENDA

1. To receive and consider the Statements of Accounts

of the Company and of the Group for the year ended

31 March 2009, together with the Reports of the

Directors and Auditors thereon.

2. To re-elect as Director, Mr. Pradipta Mohapatra

retiring in terms of the Articles of Association of

the Company.

3. To re-elect as Director, Mr. Husein Esufally retiring in

terms of the Articles of Association of the Company

4. To pass the ordinary resolution set out below to

reappoint as a Director Deshamanya J.C.L. De Mel

who has reached the age of 72 years on 6 May 2009

and vacates office as a Director of the Company in

terms of Section 210 (2) (a) of the Companies’

Act No. 7 of 2007:

‘RESOLVED that Deshamanya J.C.L. De Mel who has

reached the age of 72 years on 6 May 2009 be and

is hereby reappointed a Director of the Company and

it is hereby declared as provided for in Section 211

(1) of the Companies Act No. 7 of 2007 that the age

limit of 70 years referred to in Section 210 of the said

Companies Act shall not apply to Deshamanya

J.C.L. De Mel.’

notiCe of meetinG

5. To reappoint Messrs Ernst & Young, Chartered

Accountants as Auditors for the ensuing year

and to authorise the Directors to determine their

remuneration.

6. To authorise the Directors to determine and make

donations to Charity.

7. To consider any other business of which due notice

has been given.

By Order of the Board of

HEMAS HOLDINGS pLC

HEMAS CORpORATE SERVICES (pVT) LIMITED

Secretaries

3 June 2009

Note:

A member entitled to attend and vote is entitled to appoint a

Proxy to attend and vote in his/her place.

A Proxy need not be a Member of the Company.

A Form of Proxy accompanies this Notice.


notes

form of ProXy

I/We ………………………………………......................................................................................……………………………….

of ……………………………………………………………………………....................................................................................

being a Member/s of Hemas Holdings PLC do hereby appoint one of the following Directors of the Company:

Deshamanya Lalith De Mel or failing him

Mr. Husein Esufally or failing him

Mr. Abbas Esufally or failing him

Mr. Imtiaz Esufally or failing him

Mr. Divyaroop Bhatnagar or failing him

Mr. Murtaza Esufally or failing him

Mr. Maithri Wickremesinghe or failing him

Mr. Pradipta Mohapatra or failing him

Mr./Mrs. ………………….............................................................…………………………………………………………………..

of……..............................................................……………………………………………………………………………………….

as my/our Proxy to speak and/to vote for *me/us on *my/our behalf at the Sixth Annual General Meeting of Hemas

Holdings PLC to be held at 3.00 p.m. on Friday the 26 day of June. 2009 at the Auditorium of the Ceylon Chamber of

Commerce, No 50, Nawam Mawatha, Colombo 2 and at any adjournment thereof.

For Against

1. To receive and consider the Statements of Accounts of the Company and of the Group

for the year ended 31.03.09 together with the Reports of the Directors and Auditors thereon

2. To re-elect as Director, Mr. Pradipta Mohapatra retiring by rotation in terms of the Articles of

Association of the Company

3. To re-elect as Director, Mr. Husein Esufally retiring by rotation in terms of the Articles of

Association of the Company

4. To reappoint Deshamanya J.C.L. De Mel as a Director of the Company in terms of

Section 211 (1) of the Companies’ Act No. 7 of 2007.

5. To declare a final dividend of Rs. 1.80 per share as recommended by the Board.

6. To reappoint Messrs Ernst & Young, Chartered Accountants as Auditors of the

Company and to authorise the Directors to determine their remuneration.

7. To authorise the Directors to determine and make donations to Charity.

*The Proxy may vote as he/she thinks fit on any other resolution brought before this meeting.

...................................... Date: ......................................

Signature/s

Note:

1. Please delete the inappropriate words.

2. Instructions as to completion are noted on the reverse hereof.


INSTRUCTIONS FOR COMpLETION OF FORM OF pROXY

1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and by signing in the space

provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of

him/her.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should

be affixed and attested in the manner prescribed by the Articles of Association/Statutes.

4. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed

Form of Proxy.

5. The completed Form of Proxy should be deposited at No. 36, Bristol Street, Colombo 1, not less than forty-eight (48)

hours before the time appointed for the meeting.


LegalFormQuotedPublicCompanywithlimitedliabilitylistedonthe

ColomboStockExchangeon15October2003

DateofIncorporation10December1948

DateofRe-Registration30May2007

NewRegistrationNumberPQ6

Accountingyearend31March

RegisteredOfficeHemasBuilding

No.36,BristolStreet,Colombo1.

Websitewww.hemas.com

AuditorsErnst&Young

CharteredAccountantsNo.201,DeSaramPlace,Colombo10.

DirectorsLalithDeMel(Chairman)

HuseinEsufally(CEO)ImtiazEsufally

MurtazaEsufallyAbbasEsufally

MaithriWickremesinghePradiptaMohapatraDivyaroopBhatnagar

Secretaries&RegistrarsHemasCorporateServices(Pvt)Ltd.

No.36,BristolStreet,Colombo1Telephone:4731731(hunting)

Facsimile:4731777

LawyerstotheCompanyD.L.&FDeSaram

No.47,AlexandraPlace,Colombo7

BankersCommercialBankofCeylonPLC

DeutscheBankAGHongKong&ShanghaiBankingCorp.Ltd.

HattonNationalBankPLCStandardCharteredBank

coRPoRAte InFoRMAtIon

Prod

uced

by:

Sm

art M

edia

Pr

inte

d by

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Pvt)

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